What happened
Shares of Beyond Meat (BYND 3.45%) stock dropped 31% in August, according to data provided by S&P Global Market Intelligence. The meat-alternative company posted another disappointing earnings report, and investors are moving on.
So what
Beyond Meat was a stock market darling when it went public in 2019. It was demonstrating incredibly high growth, including several quarters of triple-digit sales growth. Its stock soared as the business grew, and it launched new products in new stores to keep up the momentum.
But after reaching a critical point, demand has softened. There are many new competitors, and the company hasn't penetrated the market of meat-eaters as it anticipated doing. Customers are moving on from what seems like an alternative-meat fad. It's not the only company in this situation; other brands are dealing with the same drop in demand as customers realize they like their meat real. In fact, competitor The Tattooed Chef filed for chapter 11 bankruptcy protection in June, and Impossible Foods never went through with an expected initial public offering.
Beyond Meat is still trying to make a go of things. Revenue dropped 31% from last year in the 2023 second quarter, reflecting the market for alternative meat products. But it has shifted to cost-cutting and boosting profitability as it struggles to generate higher growth. Gross margin was 2.2%, but that was an improvement from negative 4.2% last year. However, it also takes into account a change in the company's system for accounting of depreciation of equipment. Using the same system as last year would have lowered the margin by 5 percentage points. Net loss was $53.5 million, but that was better than $97.1 million last year.
Management lowered its outlook for the full year to about 9% to 14% decrease in revenue from 2022. It updated shareholders that while it had previously guided for operating cash flow to turn positive in the back half of the year, ongoing uncertainty in its markets means that that's not likely.
That could be a big problem, since the company's financial situation isn't inspiring. It has $226 million in cash and equivalents and $1.1 billion in debt, meaning that unless it can raise funds, it doesn't have a very long shelf life.
Now what
Beyond Meat's stock has been plummeting for a while now. It's about flat this year but down more than 90% over the past three years. There's always the possibility of a turnaround, but there isn't much to be confident about right now, and investors should stay away from Beyond Meat stock.