What happened
Shares of plant-based meat company Beyond Meat (BYND 0.65%) sank on Thursday following an analyst note that warns of the company losing a major customer, which will contribute to ongoing cash burn. As of 1 p.m. ET, Beyond Meat stock was down 4% but had been down almost 10% earlier in the session.
So what
As reported by Investing.com, BTIG analyst Peter Saleh issued a warning to clients about Beyond Meat's relationship with McDonald's. Beyond Meat is a partner in McDonald's McPlant burger, which according to Saleh is not selling very well. For this reason, the analyst doubts the McPlant will be on McDonald's national U.S. menu later this year.
Saleh also believes that Beyond Meat will burn between $440 million and $555 million this year.
To Saleh's point, Beyond Meat had negative cash from operations of $165 million in the first quarter of 2022 alone. However, Beyond Meat management said this is partly because it was building up inventory, anticipating strong summer demand. If correct, this should greatly improve the company's cash-flow situation as its inventory sells through to consumers.
Now what
In my opinion, a big part of a bullish investment thesis with Beyond Meat hinges on the company achieving efficiencies of scale. A high-sales volume menu item with the world's largest fast-food chain -- McDonald's -- would be an incredible opportunity in helping it achieve that scale. Therefore, I believe Beyond Meat's relationship with McDonald's is important.
That said, neither Beyond Meat nor McDonald's has said the McPlant burger is in danger. And there's been more than one occasion when a rumor was ultimately proven untrue. So investors should take today's headlines regarding the McPlant burger with a grain of salt.
