What happened
Shares of Beyond Meat (BYND -2.26%), a leading maker of plant-based meat substitutes, fell 28.3% in May, according to data from S&P Global Market Intelligence.
While the company turned in a weak first-quarter report mid-month, the stock was already down considerably in May before that event. The stock has been moving lower for some time, driven primarily by a string of disappointing quarterly results.
For context, in May, the S&P 500 index was barely in the green with a 0.2% return, while the tech-heavy Nasdaq Composite edged down 2%.
After having a great 2020, Beyond Meat stock is in its second year of significantly underperforming the market. In 2022, shares are down 61.5% through June 3, while the S&P 500 and Nasdaq indexes are underwater by 14% and 23%, respectively.
Image source: Getty Images.
So what
Beyond Meat stock's May drop is largely due to the continuation of its downward momentum, as previously noted. But there's another reason: market dynamics.
Market dynamics have almost surely hastened the stock's decline because highly valued so-called "growth stocks" have been out of favor this year as a result of investors' macroeconomic concerns.
On May 11, Beyond Meat released its first-quarter report. While both revenue and earnings missed Wall Street's estimates, shares only fell 4.2% the next day. That's probably in part because the disappointing results didn't come as much of a surprise to many investors.
As to the first-quarter's results, revenue edged up 1.2% year over year to $109.5 million, falling short of the $112.4 million the Street had expected. Adjusted loss widened 276% to $1.58 per share, missing the $1.01-per-share analyst consensus estimate.
Now what
In the first-quarter earnings release, management reaffirmed the full-year 2022 revenue guidance that it issued the prior quarter. For the year, it expects revenue in the range of $560 million to $620 million, representing annual growth of 21% to 33%. The company did not issue an earnings outlook.
Investors should be wary of buying Beyond Meat stock even after it's declined considerably. The company's success in clinching significant partnerships with top fast-food chains could prove to be a long-term catalyst for growth. However, its pricing power is a concern because of the intense competition in the plant-based meat substitute category.
