Beyond Meat (BYND -1.46%) has fallen 50% in value since its initial public offering in 2019, and 95% from its all-time high. It hasn't been a good investment despite the hype around plant-based meat alternatives. And there are no shortage of bearish investors out there expecting the business to fail. Can Beyond Meat possibly turn things around, or is this a stock you should stay far away from?
Short interest has been growing since the stock went public
There is an increasing number of people who are betting against the success of Beyond Meat and who are shorting the stock:
Data by YCharts.
If the company can prove the doubters wrong, a short squeeze could happen, which would send the growth stock surging. But is that likely to happen?
Beyond Meat's stock is down for good reason
It's not hard to find reasons as to why investors would be bearish on Beyond Meat's stock. The company's top and bottom lines have come under pressure over the past few years:
Data by YCharts.
During the first nine months of 2022, the company reported net revenue of $339 million, down 7% year over year. And what's worse is the company has incurred a gross loss of $20.8 million. That means after deducting the cost of goods sold, the business is already in the red. Once you factor in operating expenses and other costs, the company's total net loss for those three quarters was $299.3 million -- nearly triple the $101.7 million loss it posted during the same period a year earlier.
And during that nine-month span, the company also burned through $270.3 million in cash from its day-to-day operations (versus the $191.0 million that it burned through a year ago).
All in all, the financials just don't look good.
Is there any reason for optimism?
Making a bullish case for Beyond Meat isn't easy as its margins need a big improvement.
However, the company is aiming to have cash-flow-positive operations during the back half of this year. Management is reducing the workforce and over a 12-month period, it projects the company will achieve operating expense savings of $39 million as a result of its cost-cutting efforts. At first glance, that doesn't look to be enough to get the company anywhere near profitability, but management focusing more on bringing down expenses is nonetheless a positive sign for investors.
In November, the company also announced the launch of new plant-based chicken nugget and popcorn chicken products. Beyond already has a diverse range of products that includes chicken tenders, sausages, and burger patties. Although it has been discouraging to see Beyond Meat launch new products in the past that fail to lead to any significant revenue growth, sometimes all it can take is one or two hot-selling products to drastically improve a business's prospects.
There is still hope for Beyond Meat's stock, but it will be a long road ahead. 2023 will be another tough year if a recession takes hold. And given the company's troubling financials, this isn't an investment that would be suitable for risk-averse investors.
