Beyond Meat (NASDAQ:BYND) reported its Q3 2019 earnings on Oct. 28 after the markets closed. BYND stock lost 23% of its value on what were strong quarterly results. That drop is on top of a 60% drop in its value over the past three months.
While it’s important to see that progress is being made on both the top and bottom lines, I think it’s more important that investors forget about the selling shareholders and focus on the fact that CEO Ethan Brown’s got a long-term game plan that investors can get behind no matter the competition.
The Key Numbers
On the top line, analysts expected Beyond Meat to generate $82.2 million in sales, 22.1% higher than its sales in the second quarter. On the bottom line, the consensus estimate was for it to make four cents a share, the company’s first profitable quarter as a public company.
Beyond Meat delivered actual sales of $92 million, 11.9% higher than the consensus estimate, and 36.9% higher than Q2 2019 sales. On the bottom line, it generated a 6-cent profit, 50% higher than analyst expectations.
It beat the estimate for both revenues and earnings. More importantly, it delivered its first profitable quarter as a public company. In an environment where IPOs are getting punished for losing money, it should be viewed as a very successful quarter.
Yet, Beyond Meat stock lost almost a quarter of its value and now trades at the same level it did in May, shortly after its IPO.
In the nine months ended Sept. 30, Beyond Meat’s revenues grew 253.5% year-over-year to $199.4 million. On the bottom line through the end of September, Beyond Meat lost just $12 million in those six months.
For the “newness” of its business, that’s actually not a terrible result. If it can continue to make money on a fiscal basis in 2020, the BYND stock price should start moving back toward its 52-week high of $239.71 set in July.
BYND Stock Big Headwind
The biggest reason Beyond Meat stock has come back to the pack in the past three months has a lot to do with insider selling, both in terms of its secondary offering and potential selling once the 180-day lock-up period for insiders expired Oct. 29, the day after earnings.
It has caused investors to question the stock’s ability to remain in triple digits. Now down to $81 a share, it has become a self-fulfilling prophecy despite the excellent results.
In the company’s August secondary offering, CEO and founder Ethan Brown sold 45,000 shares at $160 a share for net proceeds of $6.9 million. Insiders have many reasons for selling, so I wouldn’t read into why he sold the shares in the secondary offering. At the time, BYND stock was trading around $176.
It’s possible that Brown felt $154 (net of expenses) was the best he was going to get over the remainder of 2019, given BYND was up 600% at that point. Not a dumb thesis.
Remember: Brown sold 45,000 shares out of 3,177,922 shares he either owned or had options exercisable within 60 days. That’s 1.4% of his holdings. That’s hardly a negative sentiment. If Brown sells a few shares after the lock-up expires, even at under $100, I still wouldn’t spend much time looking for a hidden meaning in these share sales.
People, even rich ones, have bills to pay.
The important thing to look for in the company’s earnings release and the subsequent conference call are details about the future.
What’s New at Beyond Meat?
Dunkin’ Brands (NASDAQ:DNKN) accelerated its plans for Beyond Meat’s plant-based sausage after initial trials of the donut shop’s sausage sandwich showed sales were double what Dunkin’ expected they would be.
Originally, Dunkin’ was going to launch nationwide in January 2020, but the good results convinced it to move up the rollout. The Beyond Meat sausage sandwich will be available in more than 9,000 stores starting Nov. 6.
These are feel-good stories that show plant-based meats aren’t just a fad but an important new food option that many Americans are buying into.
Another important piece of the puzzle for Beyond Meat is figuring out how to supply the Dunkin’s and McDonald’s (NYSE:MCD) of the world — The Golden Arches launched the P.L.T. in late September in Canada — without cannibalizing the sale of its product in the retail grocery segment.
I believe makers of plant-based alternatives, especially Beyond Meat, can gain customers in both segments without slowing sales. The two aren’t mutually exclusive.
“We generated very strong results for Q3, measured both by financial metrics as well as a series of marquee partnerships to position our company well for future growth,” Brown stated in the company’s Q3 2019 conference call. “Specifically, we recently initiated tests at McDonald’s, Kentucky Fried Chicken and Subway and announced the national rollout of our Beyond breakfast sausage at 9,000 Dunkin’ locations starting next month.”
If you’re smart, you’ll ignore the selling and take a bit out of BYND stock. Its earnings were a home run.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
