Beyond Meat (NASDAQ:BYND) stock dropped in early August after the plant-based meat maker reported second-quarter earnings which didn’t live up to Wall Street’s average expectations.

Specifically, while the company’s revenue topped the average estimate, the revenue of the company’s food-service business  dropped a worrisome 59% year-over-year due to restaurant and fast-food-chain closures.

Beyond Meat’s gross margins also dropped four percentage points relative to Q1. Ultimately, it swung to a narrow  loss in Q2, excluding some items. versus a narrow net profit, excluding some items, in the same period a year earlier.

It appears that Beyond Meat did not report great results, so the decline of  BYND stock seems to make sense.

But the headline numbers were weak because of the temporary challenges posed by Covid-19, while the underlying consumption of its products remains exceptionally favorable. So the company’s big-picture outlook is still bullish. That is, Beyond Meat is still on its way to disrupting the $1.4 trillion global-meat industry.

Consequently. I recommend buying BYND stock on weakness.

Here’s a deeper look at the rationale for my recommendation.

Temporary Negatives

Beyond Meat’s earnings report was mixed.

Its retail business was strong, but its food-service, i.e. restaurant business was weak. Its U.S. revenue surged 105% year-over-year, but its international revenue dropped YOY. Beyond Meat’s gross margins compressed, but they were still up YOY.  The company reported a small net loss.

I think that the positive aspects of the print are long-lasting, while the negatives will prove to be short-lived.

Beyond Meat’s food-service business was weak because of restaurant closures due to Covid-19. But restaurants have already reopened, and consumers’ behavior is normalizing. These trends will persist for the foreseeable future, and they will accelerate, assuming a Covid-19 vaccine is introduced in late 2020 or early 2021. As they accelerate, Beyond Meat’s struggling food-service business will return to hyper-growth mode.

Meanwhile, its international business was down year-over-year almost exclusively because Beyond has a small retail business overseas. Beyond is aggressively expanding its overseas retail business, and the expansion will help it weather the downturns of its overseas food-service business more effectively.

Beyond’s gross margins dropped mostly because of one-time packaging charges related to the coronavirus. Those charges will fall meaningfully in the future,  enabling its gross margins to recover.

Once its food-service business gets back into growth mode, its overall revenue growth rates will re-accelerate, causing its profit margins to expand.

So the “bad” aspects of Beyond Meat’s Q2 earnings were all temporary. Once the pandemic ends, likely within the next few quarters, they will pass

Enduring Positives

Meanwhile, the “good” aspects of Beyond Meat revealed by its Q2 earnings will last for several years.

Specifically, the 191% revenue growth of its retail business was driven by three, enduring consumption trends.

First, about 118,000 retail and food-service outlets now sell Beyond Meat products, up about 20% quarter-over-quarter. That number will only climb over time as Beyond Meat’s products land on more supermarket shelves and more fast-food menus.

Secondly, the U.S. retail market share of Beyond Meat products rose by 5.5 percentage points, and its household penetration doubled year-over-year to 5%. Those increases were driven by consumers’ pivot towards plant-based meat. The latter trend is part of a broader shift by young consumers towards buying environmentally and socially positive products and services. That pivot isn’t going anywhere anytime soon. And Beyond Meat is at the center of it all.

Thirdly, Beyond Meat is benefiting from strong customer loyalty. Beyond Meat’s repeat-purchase rate was 50% in June, versus an average repeat-purchase rate of about 35% for the consumer packaged goods sector.

Those statistics show that Beyond Meat makes top-tier plant-based meat. As long as that remains true, then as consumers pivot towards plant-based meat consumption over the next five years, they will increasingly choose and stick with Beyond’s products.

Overall, then, I think the big-picture fundamentals supporting Beyond Meat’s disruption of the $1.5 trillion global meats market remains alive and well.

Beyond Meat Stock Is Still a Winner

Despite the post-earnings selloff of BYND stock, the shares will still win in the long-term.

Over the next decade, consumers will only become more socially and environmentally aware, thanks to political movements and social-media usage. Increased social and environmental awareness will influence consumer-purchasing habits, and the current trend of consumers buying environmentally and socially positive products and services will accelerate.

The adoption of plant-based meat  fits in perfectly with this lifestyle shift. Consumers hoping to save the planet and preserve animal welfare will eat more and more plant-based meat. Restaurants and grocery stores hoping to keep up with changing demand will more prominently feature plant-based meat products in their stores. As a result,  the plant-based meat market will boom over the next decade.

Beyond Meat is at the epicenter of this trend,  and it will remain there for three main reasons.

First, it has technology advantages. Making plant-based meat isn’t easy, and Beyond Meat is much better at it than others in the space, as shown by its 50% repeat-purchase rate.

Secondly, it has distribution advantages. Beyond Meat is already in 118,000 retail and food-service outlets. That number is growing by 20% every quarter. So, by the time other players enter this space, Beyond Meat will already be everywhere, giving the brand huge distribution advantages. Plus, the company has partnerships with various fast-food chains, and it’s unlikely that fast-food chains will use multiple plant-based meat suppliers.

Thirdly, the company has a brand advantage. Beyond Meat has become THE brand for plant-based meat in many consumers’ minds. The company is basically the Tesla (NASDAQ:TSLA) of plant-based meat. This superior brand equity will help the company attract and retain customers.

Given this favorable backdrop, I maintain my previous estimate of $15 of earnings per share for Beyond Meat by 2030. Based on a  forward price-earnings multiple of 20 and an 8.5% annual discount rate, that results in a 2020 price target for BYND stock of over $140.

The Bottom Line on BYND Stock

Beyond Meat’s earnings weren’t great only because of Covid-19.

Beyond Meat’s results still showed that the company is benefiting from market-share expansion, increased distribution, strong customer loyalty, and new product launches.

Covid-19 won’t last forever. So don’t buy or sell BYND stock based on the pandemic’s impact on Beyond.

Instead, realize that plant-based meat adoption is soaring, and that Beyond Meat is at the epicenter of this trend.

And buy the dip of BYND stock.