If Beyond Meat (BYND +11.71%) is America's best-known plant-based food manufacturer, then Ethan Brown, the company's founder and CEO, might be considered the face of the U.S. meatless protein industry. He's confident and charismatic, and deserves much of the credit for building Beyond Meat into a famous brand.
Just as Brown developed a dream into a well-known business, investors may harbor dreams of making millions from simply buying and holding Beyond Meat stock. Yet Brown's confidence can't ensure Beyond Meat's long-term viability, and wide-eyed traders should check the data before taking a big bite of a fast-falling stock.
From IPO hype to survival mode
It seems like eons ago, but it was in May 2019 when Beyond Meat stock debuted for public trading at $46 per share amid hype and buzz in the financial press. Before the end of that summer, the Beyond Meat share price would surpass $200.
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Key Data Points
Brown and Beyond Meat certainly can't be faulted for having their initial public offering (IPO) less than a year before the COVID-19 crisis. The pandemic may have prompted some consumers to lean toward healthier food choices, but this wasn't enough to stem the broad-based wealth destruction that ensued in 2020's first quarter.
Still, as 2023 transitions into 2024, the pandemic can't account for Beyond Meat's problems anymore. And those problems are significant, with TD Cowen analysts going so far as characterizing Beyond Meat as being in "survival mode" and presenting a going concern risk not long ago. Meanwhile, Beyond Meat stock recently traded at $8 and change, a far cry from its debut price.
How could this have happened? Beyond Meat has partnerships with consumer industry giants like Costco Wholesale, Yum! Brands-owned Pizza Hut, and Target. At first glance, the decimation of Beyond Meat stock might seem baffling and could look like a blood-in-the-streets, millionaire-making opportunity for investors.
Can't argue with the numbers
To a certain extent, Beyond Meat's fall from grace may be due to the overall demand for plant-based foods not living up to the 2019 hype. This would be a tough problem to solve, as recent data indicates that consumers don't acquire a preference for plant-based foods even after being exposed to them.
Along with the ups and downs of the plant-based foods market, Beyond Meat had to deal with the financial market's loss of appetite for profitless businesses in 2022 and 2023. Elevated interest rates had a sobering effect on stock traders, and the speculative fervor of 2019 through 2021 didn't persist long enough to keep Beyond Meat stock afloat, it seems.
Macro-level concerns aside, Beyond Meat's financial facts don't bode well for the company. The TD Cowen analysts cited Beyond Meat's "deteriorating financial situation" as a going concern risk factor, and unfortunately, there are data points to support their cautionary tone.
Beyond Meat's revenue declined 8.7% year over year in 2023's third quarter. Furthermore, the company's position of cash and cash equivalents diminished from $309.9 million at the end of 2022 to $217.5 million at the end of Q3 2023. Additionally, Beyond Meat lowered its full-year 2023 revenue guidance from $375 million to $415 million previously predicted in May, to current guidance of $330 million to $340 million.
Beyond Meat also reduced its 2023 gross margin guidance and didn't make a full-year operating-cash-flow prediction in the company's updated guidance. Moreover, in a conference call, Brown acknowledged that Beyond Meat's "pricing programs" (i.e., reducing the prices of some products) failed to help the company's product demand "move from early adopters to mainstream consumers."
Only time will tell whether Beyond Meat's relatively new cost-cutting strategy, which involves laying off 19% of the company's non-production workers, will materially improve Beyond Meat's financials. Also on the bullish side of the debate is the company's European sales, which grew in the third quarter.
Not enough meat on the bone
Nonetheless, investors undoubtedly want to see Beyond Meat serve more than a "nothing burger" in the company's upcoming quarterly reports, especially in terms of U.S. sales. Interestingly, Brown promised a "more nuanced pricing strategy," so at least Beyond Meat's investors can chew on that for a while.
At least, one can say that Brown remains supremely confident. In stark contrast to TD Cowen's nihilism, Brown contends that Beyond Meat has the "arc of history" on its side.
It feels good to hear Brown's optimism. Yet, that's only a momentary sense of calm amid the painful decline of Beyond Meat stock. Sure, history may end up proving Brown right and Beyond Meat's long-term shareholders could end up turning thousands into millions. Until the data fleshes out Brown's lofty vision, though, prudent traders should hunger for something more promising.
