After almost a 46% decline this year, at the current price of around $7 per share, we believe Beyond Meat stock (NASDAQ: BYND), a plant-based meat alternative – is fairly priced. BYND stock has dropped from around $12 to $7 year-to-date, largely underperforming the broader indices, with the S&P growing about 18% over the same period. The company has been facing challenging revenue and considerable cash burn for about two years now. The company’s stock has declined thanks to the combination of inflation, pandemic-related shifts in demand, and rising competition. Beyond Meat’s stock remains under pressure as revenue continues to fall and solvency concerns persist. Compared to its peers, BYND has not yet earned a full-year profit. 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. There are a number of headwinds that continue to pressure BYND stock going forward. In the U.S., the company’s distribution has maxed out, while inventory levels remain high. Moreover, the company is dealing with low utilization of plants, lower revenue per pound, and termination of co-manufacturing agreements. The company also has a substantial amount of debt in its capital structure, which may become a meaningful risk factor in the current high-interest rate environment. BYND has $1.1 billion in debt on its balance sheet and a limited cash runway of $232.8 million (down from $310 million at year-end 2022).
BYND stock has suffered a sharp decline of 95% from levels of $125 in early January 2021 to around $7 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. Notably, BYND stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -48% in 2021, -81% in 2022, and -46% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 19% in 2023 (YTD) – indicating that BYND underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector including WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BYND face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?
Beyond Meat’s gross margin turned negative in 2022 compared to its positive gross margins of 25% in 2021 and 30% in 2020. In fact, the company’s gross margins were still in the red with Q3 margins at -9.6% but still better than the year-ago levels. Q3 2022 gross margins stood at -18%. Lower manufacturing costs, lower materials costs, lower depreciation, and lower inventory reserves per pound helped this improvement. That said, the company has a heavy focus on marketing and promotional activities, which doesn’t bode well for its margins. In Q3 2023, the company’s revenue of $75 million was down almost 9% year-over-year (y-o-y), driven by an 11.6% decrease in net revenue per pound, partially offset by a 3.5% increase in the volume of products sold. In addition, the company’s adjusted EBITDA came in at a loss of $57.5 million compared to a loss of $73.8 million in the year-ago period.
We forecast Beyond Meat’s Revenues to be $367 million for the fiscal year 2023, down 13% y-o-y. We now forecast revenue per share (RPS) to come in at $6.12. Given the changes to our revenues and RPS forecast, we have revised our Beyond Meat’s Valuation to $7 per share, based on a $5.76 expected RPS and a 1.2x P/S multiple for the fiscal year 2023 – almost 5% higher than the current market price. That said, the company’s stock appears appropriately priced at the current price. Beyond Meat expects net revenues to be in the range of $330 million to $340 million in FY 2023, representing a decrease of approximately 21% to 19% compared to 2022. The company continues to expect operating expenses to be approximately $245 million or less, before one-time separation costs and potential savings associated with the company’s recent reduction in force.
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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