While Beyond Meat's (BYND 10.28%) problems didn't suddenly appear out of nowhere in 2022, last year was particularly troublesome for the plant-based foods manufacturer. The company's products were never known to be ultra-cheap, and elevated inflation undoubtedly drove some customers to less pricey fare (which, in some instances, included actual meat).
So Beyond Meat stock is under heavy pressure, as is the company itself. This raises the billion-dollar question of whether the stock is a terrific value or a falling knife to be avoided at all costs. The company's data might provide the answer -- or at least some thought-provoking questions. But first, let's assess the share-price damage done.
Beyond Meat beats the Street
It might seem like a memory of the distant past, but it was only three-and-a-half years ago that Beyond Meat stock traded near $235. Fast-forward to March of 2023, and the shares only cost around $18 apiece.
NASDAQ: BYND
Key Data Points
There's a lesson here, perhaps, in what can happen when investors buy during peak hype -- or in Beyond Meat's case, when investors wager on a premium-priced consumer-goods business during a time of relatively low inflation. Of course, this lesson is only learned in hindsight, so now it's a question of whether to buy Beyond Meat stock at a 92% discount to its prior peak price.
For what it's worth, Beyond Meat's shareholders did get a brief shot in the arm as the stock rallied 20% post-earnings. This looked more like a "not as bad as anticipated" rally, though, rather than a sign that Beyond Meat stock is necessarily a good value.
Buy-side traders were primarily celebrating Beyond Meat's Street beats: a Q4 2022 net loss of $66.9 million, or $1.05 per share, versus the analyst consensus estimate of a $1.18-per-share net loss. This result also indicated a narrowing net loss compared to the year-earlier quarter's net loss of $80.4 million, or $1.27 per share.
This looks like steady but slow progress, and cautious investors might choose to accept CEO Ethan Brown's target of "cash flow positive operations within the second half of 2023," albeit with a grain of salt. Bear in mind, Beyond Meat's cash, cash equivalents, and restricted cash dwindled from $733.3 million at the end of 2021 to $322.5 million at 2022's end.
Cost cuts might not outweigh inflation's impact
Along with the EPS beat, Beyond Meat emphasized its commitment to reducing outlays. In a conference call, Brown proudly pointed out a $12.1 million or 16% sequential reduction in the company's operating expenditures. Moreover, going forward, Brown posited that this Q4 cost-cutting result will be "generally representative of our expected level of spending on a quarterly basis."
Fair enough, but there's a countervailing force in reduced demand for relatively pricey meatless products generally. Beyond Meat acknowledged this, noting that the company's "operating environment continues to be affected by near-term uncertainty related to macroeconomic issues, including inflation and rising interest rates, demand in the plant-based meat category," and other contributing factors.
This ongoing concern would certainly help to explain Beyond Meat's 20.6% year-over-year fall-off in its fourth-quarter revenue. Thus, Cowen analyst Brian Holland's assessment matches my own: "We are encouraged by tighter cost management, but for us to become constructive, demand will have to increase -- on this, we remain skeptical."
If you're skeptical too, then it's probably time to consider how much further Beyond Meat stock could fall during a time of sticky inflation, and whether there's much meat left on the bone for eager investors.
