What a crazy year it’s been for Beyond Meat (NASDAQ:BYND) shareholders. Up 51% in the past month through April 28, BYND stock is down 19% over the past three months.
If you bought the plant-based meat company’s stock at mid-March lows, you’re smiling from ear to ear. However, if you bought in mid-February, you’re probably not too happy.
At this point, investors have got to be wondering if Beyond Meat has more upside, or is its January high of $129 as good as it gets for 2020?
Let’s have a look at both sides of the argument.
BYND Stock Has Plenty of Life
One of Beyond Meat’s goals for 2020 was to enter the Chinese market. On April 21, Beyond Meat’s products were available for sale at Starbucks (NASDAQ:SBUX) locations throughout China. With almost 100% of its 4,200 stores reopened, Beyond Meat’s revenues ought to experience a nice tailwind through the remainder of the year.
“Today we mark an important milestone as Beyond Meat launches in China, advancing our goal of increasing accessibility to plant-based protein globally,” Beyond Meat CEO Ethan Brown said in a statement.
What makes the launch more exciting is that it comes at a time when as many as 12 meatpacking plants in the U.S. had to shut down due to the novel coronavirus. As shortages occur, consumers will look to meatless products to fill the void. It’s an opportunity to reach a new customer base, which is always a good thing for a business.
In addition to the product launch in China, Beyond Meat announced on April 22 that it had secured a $150 million five-year secured revolving credit facility to maintain its growth trajectory. The credit facility provides the company with an option to expand the facility to $350 million if necessary.
“Our current cash and liquidity position is strong, and we are pleased to complete this New Credit Facility on terms that will provide Beyond Meat with a greater amount of financial flexibility and better position the Company for long-term success,” Beyond Meat’s Chief Financial Officer said in its press release.
While many companies are using their credit facilities to stay afloat, Beyond Meat is using its revolver to accelerate growth.
At the end of December, it had $276 million in cash on its balance sheet compared to just $30.6 million in debt. It expects to generate as much as $510 million in net revenue in 2020 with 8.5% adjusted EBITDA margins.
The company’s web page points out that in the 12 weeks ended Feb. 23, Beyond Meat’s sales in refrigerated plant-based meat were twice as large in terms of dollars as its next closest competitor. Its sales are growing at almost 250% compared to its sales in 2019.
Beyond Meat reports first-quarter results May 5. They ought to be reasonably healthy despite the coronavirus. Unless there are negative earnings surprises, BYND stock ought to keep moving higher post-earnings.
You Shouldn’t Expect Much More Appreciation in 2020
Of the 20 analysts covering Beyond Meat, only four have a “buy” rating. The rest are either “hold” (12), “underweight” (2) and outright “sell” (2). As for the analysts’ average 12-month target price, it is $78.89, 21% lower than where Beyond Meat’s stock is currently trading.
That’s not exactly brimming with confidence.
In late March, Goldman Sachs analyst Adam Samuelson downgraded Beyond Meat from “sell” to “neutral,” suggesting that the company’s foodservice sales could take a hit due to Covid-19.
“BYND represents one of the stocks that is most directly impacted by the Covid-19 outbreak, with over half its sales into the foodservice (primarily QSR) channel,” Samuelson wrote on March 26. “We see scope for further underperformance ahead as investors recalibrate the pace of both underlying traffic trends and new distribution wins on the future growth trajectory.”
For those that don’t speak the language of analysts, Samuelson is suggesting that the company’s ability to replace lost sales due to Covid-19 isn’t going to be nearly as effective as some might think.
We’ll know more on May 5.
The Bottom Line on BYND Stock
I often mention Canadian money manager Stephen Jarislowsky’s belief that you can often buy an IPO stock for less than the IPO price within 12-24 months. In Beyond Meat’s case, the closest it’s come to falling below $25 was on the first day of trading last May when it closed at $45, down from the first-day high of $72.95.
I believe that Covid-19 is going to change the way people feel about food, especially the meatless variety, in a good way. That said, betting on the direction of specific stocks right now is a mug’s game.
The last time I wrote about Beyond Meat was in March. At the time, I recommended that investors wait until the full ramifications of the coronavirus were felt before betting on its stock.
I still feel that way as I don’t think the first-quarter results will be as bad as some analysts believe. That said, I think you’ll be able to buy it for $75 within the next few months.
Long-term, I think it’s a buy.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.