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Why Beyond Meat Stock Surged 65% in 2020

By Beth McKenna - Jan 4, 2021 at 9:05PM

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The COVID-19 pandemic has provided both a tailwind and a headwind to the plant-based meat substitute leader's business.

What happened

Shares of Beyond Meat ( BYND -0.62% ), the leading maker of plant-based meat substitutes, soared 65.3% in 2020, according to data from S&P Global Market Intelligence. The company went public in May 2019.

For context, the S&P 500 index returned 18.4% last year.

Beyond Meat stock kicked off 2021 with a small gain of 0.5% on Monday, whereas the broader market fell 1.5%.

Two Beyond Burgers with cheese, a white sauce, greens, and onions in buns.

Image source: Beyond Meat.

So what

Beyond Meat stock's strong performance last year is largely attributable to its results for the first and second quarters, which beat Wall Street's expectations. 

In the first quarter, revenue soared 141% year over year to $97.1 million, crushing the $87.3 million analyst consensus estimate. Earnings per share were $0.03, versus a loss per share of $0.95 in the year-ago period. The Street had projected a loss per share of $0.06.

In the second quarter, revenue jumped 69% year over year to $113.3 million. That may seem like a disappointing result compared to the prior quarter's year-over-year performance, but it sped by the $99.8 million consensus estimate. (The bottom-line result, a loss per share of $0.02, was in line with the Street's estimate.) This quarter was the first one that was entirely affected by the pandemic, which only impacted sales at the tail end of the first quarter.

In Q2, the pandemic provided a brisk tailwind to Beyond Meat's retail sales, as consumers increased their at-home eating and stocked their freezers. However, food service sales were hurt due to temporary closures of restaurants and other food service businesses. In the retail channel, U.S. and international sales surged 195% and 167%, respectively, while food service sales in the two regions dropped 61% and 57% year over year. 

Shares had begun moving down in October and fell even further after the company's early November release of third-quarter results, which fell short of Wall Street's estimates on both the top and bottom lines. The company's revenue grew just 3% year over year, and it turned in a loss of $0.28 per share, compared with earnings of $0.06 per share in the year-ago period. As I wrote in my Q3 earnings article:

The company's revenue growth was primarily driven by an increase in retail sales, which was mostly offset by a decline in food service sales due to the continued impact of the COVID-19 pandemic. In addition, some retail demand that would have normally been fulfilled in Q3 was pulled forward into Q2 due to pandemic-driven consumer freezer-loading. Moreover, promotional activities (lower prices) intended to induce more new consumers to try Beyond Meat products also took a bite out of the top line.

BYND Chart

Data by YCharts.

Now what

Beyond Meat hasn't yet announced the date of its release of its fourth-quarter results, but it will probably be around late February.

Management didn't provide guidance for Q4, citing continued uncertainty surrounding the pandemic. For the quarter, Wall Street is currently modeling for revenue to grow 8% year over year to $106.5 million, and for a net loss of $0.12, compared to a net loss of $0.01 in the year-ago period.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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