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Beyond Meat Stock Plummets as IPO Lock-Up Period Ends

By Joe Tenebruso - Updated Oct 29, 2019 at 3:11PM

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Early investors may be heading for the exits.

Beyond Meat (BYND -5.75%) delivered solid third-quarter results after the market closed on Monday. Yet on Tuesday, shares of the plant-based food purveyor plunged.

The likely reason? Beyond Meat's initial public offering lock-up period ended today, and many insiders appear to be using the opportunity to unload their shares.

A person pointing to a declining stock chart.

After surging earlier in 2019, Beyond Meat's stock has fallen sharply in recent weeks. Image source: Getty Images.

Beyond Meat's third-quarter revenue surged 250% year over year to $92 million. The company has rapidly expanded its distribution channels in the past year. Beyond Meat has struck deals with major restaurant chains like Tim Hortons, Dunkin' Brands Group, and McDonald's. "We generated very strong results for Q3, measured both by financial metrics as well as a series of marquee partnerships to position our company well for future growth," founder and CEO Ethan Brown said during a conference call with analysts.

Beyond Meat also delivered its first quarterly profit. Gross profit soared 550% to $32.8 million as gross margin increased to 35.6% from 19.2% in the prior-year quarter. Operating income came in at $3.6 million, compared to an operating loss of $8 million in Q3 2018. And Beyond Meat delivered net income of $4.1 million, or $0.06 per share, compared to a net loss of $9.3 million, or $1.45 per share, in the prior-year period.

"After 10 years of aggressively investing in our science and product innovation, this is the first quarter we have generated net income," Executive Chairman Seth Goldman said. "It is a wonderful validation from consumers who support our business strategy of building meat directly from plants and choose Beyond Meat for its superior taste and texture while enjoying the nutritional and environmental benefits of eating our plant-based meat products."

Notably, Beyond Meat's results came in significantly above Wall Street's estimates. Analysts had expected the company to report revenue and EPS of $82.2 million and $0.03, respectively.

Beyond Meat also boosted its full-year forecast. Management is now guiding for revenue of $265 million to $275 million, up from previous guidance of more than $240 million. "This reflects our expansion in the number of retail and foodservice points of distribution, including new strategic customers, new international customers, and greater demand from existing customers," CFO Mark Nelson said.

Selling pressure

Yet despite all this good news, Beyond Meat's stock is down more than 20% as of 3:00 p.m. EDT on Tuesday.

Analysts believe the sell-off is related to the end of the recent initial public offering's lock-up period. Today is the first time since the company's IPO that insiders can sell their stock.

Brown, for his part, is not selling his shares. But today's decline suggests investors are concerned other insiders and early investors might sell theirs.

Still, some see the sell-off as a potential buying opportunity. "Putting the lock-up expiry in the past ultimately should incent some investors to start buying the stock again, though the shares could fade lower beforehand," JPMorgan analyst Ken Goldman said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has the following options: short January 2020 $94 calls on Restaurant Brands International. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.

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