After almost a 60% decline year-to-date, at the current price of around $26 per share, we believe Beyond Meat stock (NASDAQ: BYND), a plant-based meat alternative – could see more declines. BYND stock has declined from around $65 to $26 YTD, largely underperforming the broader indices, with the S&P falling about 13% over the same period. The company’s stock has declined of late thanks to the combination of inflation, pandemic-related shifts in demand, and rising competition. We forecast BYND shares to trade at a valuation of 2.8x forward price to sales ratio, above those of other food makers, for example, Campbell’s (NYSE: CPB) and Kellogg’s (NYSE: K) trading at a valuation close to 1.8x price to sales ratio. When compared to its peers, BYND has not even earned a full-year profit yet. While we acknowledge that it is not surprising for Beyond Meat to be unprofitable since it is a fairly young company (IPO in May 2019) still in its investing phase, the weak financials in the last few quarters have made investors skeptical about its growth ahead. Furthermore, consumers are now less willing to try new plant-based meat products than they did a year ago and are looking for discounts and deals instead, in the current shopping environment.
In the first half of 2022, Beyond Meat’s revenue fell 0.4% year-over-year (y-o-y) to $256 million. Its U.S. revenue rose 2.4% to $186 million as the growth of its retail segment offset its declining food service business. However, international revenue fell 7.1% to $70 million as declining retail revenue offset the anemic growth of its food service segment. Beyond Meat’s total pounds sold actually increased 14.6% y-o-y in Q2 2022, but that volume growth was completely offset by a 14.2% decline in its net revenue per pound, largely due to liquidation sales and currency headwinds. To make matters worse, sales of Beyond Meat Jerky through its Planet Partnership joint venture with PepsiCo further weakened gross margin. That sais, the company’s Q2 gross profit margin collapsed to a 4.2% loss compared to a 31.7% profit a year ago, and a positive gross profit margin of 0.2% in Q1 2022. BYND’s net loss was $97 million or 66% of sales. That loss actually represents an improvement compared to the first quarter when losses reached over 90% of sales. The $1.53 per-share adjusted loss expanded materially from the $0.31 loss in the second quarter of 2021.
For the second half of the year, Beyond Meat expects gross margin to turn positive again but remain in the low to mid-single-digits and well below historical norms. For the full year of 2022, management expects revenue to rise between $470 million and $520 million this year, or 1% to 12%, compared to its prior forecast for $560 million to $620 million, or 21% to 33% growth. The company also announced it would lay off about 4% of its workforce to save $8 million annually. Lay-offs and cost cuts should help the company stabilize its near-term profitability, but we do not expect the company to break even any time soon.
We have updated our model following the Q2 release. We forecast Beyond Meat’s Revenues to be $491 million for the fiscal year 2022, up 6% y-o-y. Looking at the bottom line, we now forecast revenue per share (RPS) estimate to come in at $7.78. Given the changes to our revenues and RPS forecast, we have revised our Beyond Meat’s Valuation to $22 per share, based on a $7.78 expected RPS and a 2.8x P/S multiple for the fiscal year 2022 – almost 18% lower than the current market price. That said, the company’s stock appears expensive at the current price.
While BYND stock looks poised for more declines in the future, it is helpful to see how its peers stack up. Check out how Beyond Meat’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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