Plant-based meat producer Beyond Meat, Inc. (BYND) operates under the Beyond Beef, Beyond Sausage, The Cookout Classic, The Future of Protein, and other design trademarks. BYND’s stock gained 26.7% last week, amid a fresh frenzy around Reddit-driven ‘meme’ stocks. The Reddit forum WallStreetBets’ moves to squeeze short sellers out of their positions propelled AMC Entertainment Holdings, Inc.’s (AMC) and GameStop Corporation’s (GME) massive rally earlier this year. And now the forum’s attention appears to be on BYND stock.
However, according to Bank of America (BAC), potential regulatory actions later this year could lead to a moderation in Reddit-fueled rallies. In that case, the frenzy is expected to fade soon enough.
Furthermore, although the company is expanding its foodservice business both domestically and in certain international markets, it is still generating substantial losses. And its profitability remains poor.
So, here is what we think could influence BYND’s performance in the near term:
Speculative Trading
According to Bank of America, BYND could be the next stock to be pulled into the Reddit-fueled meme-stock mania. The stock took off last week as BofA named Beyond Meat the new meme darling. While the rally could continue for a while, BofA expects the retail-investor craze to fade later this year amid a potential regulatory clampdown, peak stimulus, and re-opening of the economy. This could lead BYND to witness a price pullback.
Unimpressive Financials
BYND’s international foodservice revenues declined 44% year-over-year to $10.4 million in the first quarter, ended April 3, 2021. The company’s gross profit declined 13.2% year-over-year to $32.7 million due to higher transportation and warehousing costs. Also, its loss from operations came in at $24.6 million, compared to $1.8 million in income from operations in the prior-year quarter. BYND reported a $27.27 million net loss and a loss per share of $0.43 over this period. Also, its adjusted EBITDA was negative $10.8 million in the first quarter of 2021, compared to $13.9 million in adjusted EBITDA in the year-ago period.
The company’s trailing-12-month gross profit margin of 30.8% is 13.5% lower than the 35.6% industry average. Moreover, its trailing-12-month net income margin, ROA and ROE came in at negative 19.6%, 5.6% and 25%, respectively.
Weak Growth Prospects
A $142.41 million consensus revenue estimate for the current quarter, ending June 2021, indicates a 25.7% improvement year-over-year. However, analysts expect BYND’s EPS to remain negative until 2022. Its consensus EPS estimates indicate a 1,100% year-over-year decline in the current quarter, and a 58.3% decline in the current year. Its EPS is expected to decline at the rate of 6.9% per annum over the next five years. BYND has a poor earnings surprise history. It missed the consensus EPS estimates in three of the trailing four quarters.
Consensus Rating and Price Target Indicate Potential Downside
Of 15 Wall Street analysts that rated the stock, only one rated it Buy. BYND has a $127.93 consensus price, indicating downside risk. The stock’s price target ranges from a low of $58 to a high of $190.
POWR Ratings Reflect Bleak Prospects
BYND has an overall F rating, which translates to Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BYND has a D grade for Growth and Momentum. Analysts’ expectation that the stock’s EPS will decline year-over-year in the current year is in sync with its Growth grade. Also, BYND’s negative 0.04% price returns over the past three months justify its Momentum grade.
Also, BYND has an F grade for Quality. This is in sync with the company’s poor profitability.
In addition to the grades we’ve highlighted, one can check out additional BYND ratings for Sentiment, Stability and Value here.
Of the 81 stocks in the C-rated Food Makers industry, BYND is ranked #81.
There are several top-rated stocks in the same industry. Click here to view them.
Bottom Line
While the recent run-up in the BYND stock could be attributed to the surge in speculative trading activities by the infamous WallStreetBets Reddit forum, Bank of America expects the frenzy to abate soon. So, given the company’s weak fundamentals and growth prospects, we think the stock could be due for a pullback.
BYND shares were trading at $132.67 per share on Tuesday morning, down $12.75 (-8.77%). Year-to-date, BYND has gained 6.14%, versus a 12.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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