After almost a 46% decline over the last twelve months, at the current price of around $13 per share, we believe Beyond Meat stock (NASDAQ
NDAQ
: BYND), a plant-based meat alternative – could see more weakness. BYND stock has dropped from around $24 to $13 over the last twelve months, largely underperforming the broader indices, with the S&P growing about 16% over the same period. 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 $258.6 million (down from $310 million at year-end 2022).
Beyond Meat’s gross margin turned negative in 2022 compared to its positive gross margins of 25% in 2021 and 30% in 2020. While the company’s gross margins improved in Q1 to 6.7%, much of that gain was on accounting function as the life of some of its manufacturing equipment was increased in the quarter. That said, the company has a heavy focus on marketing and promotional activities, which doesn’t bode well for its margins. The company also saw declining volumes along with falling prices in Q1. The company’s net revenue of $92 million was down almost 16% year-over-year (y-o-y). BYND’s U.S. Retail volume plunged 33% y-o-y to $8.3 million pounds, U.S. Foodservice volume saw a 7% decline to 2.6 million pounds, and International retail volumes fell 6% to 3.3 million pounds. The only bright spot was International Foodservice, where volumes rose 115% to 5.5 million pounds.
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