Beyond Meat (BYND 0.95%) investors had a forgettable 2023. Shares of the plant-based meat specialist declined 20% through mid-December even as the broader market rallied. The beaten-down stock is more than 90% below the peak levels it reached in early 2021, back when consumers were enthusiastic about trying out its meat substitute products.
Things have changed dramatically since then. Shoppers are back to more normal spending patterns around traditional meats like poultry and beef. Beyond Meat has been slow to adjust to this demand shift, too. As a result, the company is losing money on both a gross profit and net profit basis as we approach 2024.
The good news is the stock is available at a big discount that reflects these challenges. With that prospect for a rebound in mind, let's look at whether investors should consider putting Beyond Meat in their shopping baskets for 2024.
Not stabilized yet
The main trend to understand about the business is that it hasn't stabilized yet. Sales in the most recent quarter, which ran through late September, were down 9%. The core U.S. market was especially weak. Revenue was down 34% in the wholesale channel that covers supermarket chains and big box retailers. Sales volumes declined 19% despite an identical 19% drop in prices.
Management said it was encouraged by stronger demand in places like Europe, but the weakness in the U.S. segment doesn't bode well for its quick rebound hopes. "We are disappointed by our overall results as we continue to experience sector-specific and broader consumer headwinds."
In other words, shoppers are spending less on discretionary food items and scaling back even more sharply in the plant-based meat niche. Investors can expect these problems to impact 2024 as well.
Seeing red
Executives are reviewing the business, looking for ways to aggressively cut costs by restructuring the operations. It's clear that Beyond Meat needs a much smaller cost burden if it is going to generate sustainable profits. Net losses over the last nine months were $183 million compared to $299 million a year earlier. While it's nice to see the red ink lessen, that 2023 figure still amounts to a painful two-thirds of sales. Beyond Meat's operating losses are similarly large at 67% of sales.
BYND Operating Margin (TTM) data by YCharts
Those trends should improve over the next several quarters. Beyond Meat has made excellent progress at cutting inventory, after all. And there's likely to be a bigger restructuring plan announced in the coming months that slashes costs even further.
But investors shouldn't jump into this stock just now. There isn't a clear path toward profitability and sales trends are far from stabilizing. Sure, a few of Beyond Meat's latest introductions were popular with consumers. But the overall market is still shrinking, and that's making it hard to expand sales despite the company's valuable brand and network of partnerships with companies like PepsiCo.
Beyond Meat could deliver excellent returns for investors willing to buy shares at its low valuation today. That cheap price reflects big risks around the timing of any return to profitability, though. Keep this stock on your watch list for 2024, but avoid making it a significant part of your growth stock portfolio.
