Shares of Beyond Meat (BYND 2.79%) were levitating today, up more than 11.8% as of 1:37 p.m. ET. The reason for the rise wasn't hard to figure out; yesterday, Beyond Meat announced a new partnership with Kim Kardashian, who will become Beyond Meat's first "Chief Taste Consultant."
Beyond Meat's shares have been decimated this year, down 82% over the past 12 months, as the company has disappointed on expectations for disruptive growth. Therefore, it's no surprise that landing a big celebrity spokesperson with a beaten-down share price caused a one-day spike. But are these gains as sustainable as the food?
In the press release announcing the new partnership, Kardashian said: "I am really inspired by Beyond Meat's mission and love that they are not only making plant-based eating delicious and accessible, but are doing so in a way that benefits both people and the planet. It's empowering to know that the small changes I'm making for my family, like incorporating more Beyond Meat into our meals, can add up to make a big impact." Kardashian will share her favorite products and recipes in the Beyond Meat newsletter, with exclusive deals and offers.
This was welcome news for shareholders, who have endured a total collapse in the stock price. And unlike perhaps some other stocks that have seen a mere valuation de-rating, Beyond Meat's operational results have also been dismal. Last quarter, revenue only increased 1.2%, and gross margin totally collapsed to near zero. The company also lost $100.5 million in the first quarter alone, reflecting a (91%) net loss margin. Formerly seen as a high-growth stock, the current low growth rate is raising significant doubts about Beyond Meat's future.
Beyond Meat seemed to increase its trade discounts in order to move more product last quarter, while investing heavily in the growth of the business, both from a product and geographic perspective. That's the wrong combination in today's inflationary environment, and it's understandable that investors have been selling the stock.
The question is, is this Kim Kardashian partnership a game changer? Color me skeptical. After all, Beyond Meat has had celebrity endorsers before, including the likes of Kevin Hart and Snoop Dogg, and famous athletes like Shaquille O'Neal, Chris Paul, DeAndre Hopkins, Lindsey Vonn, and many others. None of these endorsements appear to be helping with Beyond Meat's current financial results.
If plant-based meat is really the future of food, one would expect the company's growth rate to be much higher. While management has pointed to some headwinds amid the pandemic and reopening, it's hard to point to that as the only excuse several quarters later. The low growth could reflect a near-term saturation of the early adopter market, or increased competition from others, such as Impossible Foods, which is still private.
Either way, it's nice to see Beyond Meat get a bit of good news, and I am rooting for the company. But investors should remain skeptical until there's more tangible progress on revenue growth and margin expansion -- not just celebrity endorsements or big partnership announcements.