Beyond Meat (BYND 2.15%) sizzled last week, with shares surging 238% on two pieces of positive news. First, Roundhill Investments added the plant-based meat maker to its new Roundhill Meme Stock ETF, triggering a 128% rally. The following day, Beyond Meat announced an expanded distribution deal with Walmart, which fueled a 146% pop.
While Beyond Meat's big week seemed to renew investor interest in the beleaguered burger maker, there were no changes to its fundamentals -- which are just awful.
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Meme mania goes meatless
Last week's hysteria had all the ingredients of a retail-driven short squeeze: a beaten-down meme stock, massive short interest, and some positive catalysts to ignite the flame. At its peak, Beyond Meat shares were up nearly 1,100% for the week until an update on the company's grim financial picture brought the stock back to Earth.
On Friday, Beyond Meat disclosed preliminary third-quarter results, which were in line with its guidance -- and that's the problem. The company expects third-quarter revenue of roughly $70 million, or a 14% year-over-year decline. In Q2, revenue dropped 20% to $75 million, and the company reported a net loss of $29.2 million.
Even with last week's rally, Beyond Meat stock has plummeted 99% from its 2019 all-time high. The company has three major challenges: declining sales, persistent losses, and crushing debt.
Beyond Meat recently converted a big chunk of debt to shares, reducing its debt load dramatically. However, the stock price hit an all-time low on Oct. 16 when the company announced that lock-up restrictions were expiring on 316.2 million newly issued shares.
The company's problems go deeper than its balance sheet. In a time of sticky inflation, shoppers have soured on premium-priced plant-based foods, and there have been questions about the health benefits of meatless alternatives. Then there's this towering obstacle: Many consumers simply don't like the taste of fake meat.
Beyond Meat has hired consulting firm AlixPartners to help turn things around, and announced a 6% trim in headcount. I wouldn't be surprised if Chapter 11 reorganization is one of the options being explored.
