Beyond Meat (NASDAQ:BYND) has fallen out of favor a few times over the last year. But after its most recent earnings report, BYND stock is back on investors’ radar. Shares pushed through big-time resistance, and are set up for a possible breakout higher.
On May 5th, Beyond Meat reported earnings of 3 cents per share, surprising analysts with a 3-cent beat and a surprise profit. Moreover, revenue grew 141.4% year-over-year to $97.1 million and beat estimates by about $10 million.
It was the quarter that bulls needed to see. All those pictures circulating online of fully stocked alternative-meat products no one seemed to want during the pandemic were put to rest — at least for now. Shares ripped higher by 26% on the report, and are now higher by more than 37%.
So, with all of that in mind, let’s look at the charts before diving in.
Trading BYND Stock
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BYND stock did not end 2019 on a good note, as Q4 was a rough ride. The first day of October was the stock’s high for the quarter. Shares hit a high near $150, but ended the month just above $80 and continued to grind along $75 through year-end.
However, once 2020 came around, shares erupted higher — running from $75 to $130 in less than two weeks. This $130 area became resistance, though, stymying each rally in BYND stock until shares finally rolled over in February with the rest of the market.
Fast-forward to May, and the stock was finally able to breakout over this mark on earnings and are now finding $130 as support. Coiling in the mid-$130s now, I think a move to $160-plus is possible. That is, assuming the overall market can hold up as well. If the market rolls over, it’s possible that BYND stock will too.
Short of that, though, this has all of the makings of a solid breakout. Earnings were strong and are in the rear-view mirror. Shares are through resistance and now holding that level as support. A move above $147.55 — the May high — puts $160 in play, followed by the 138.2% extension of the 2020 range, up near $168.
Should the breakout fail, however, it puts the 200-day moving average in play. This level was resistance in April and was notably reclaimed on the post-earnings open in BYND stock.
Breaking Down Beyond Meat
When I look at a company’s fundamentals, I immediately scope out four areas of interest. These readings give me a quick idea of whether the business is growing and what its financial health is like. Obviously, an exam goes deeper than just the surface, but this gives us a quick idea of what we’re dealing with.
The list includes: revenue, margins (both gross and operating), free cash flow and assets vs. liabilities.
Broken down simply, revenue tells us whether the company is growing or not. That’s pretty self-explanatory. Margins can be trickier, though, because contracting margins doesn’t necessarily reflect an unhealthy company. But when they are expanding, it’s a much-sought after catalyst.
We like to see positive free cash flow, but again, there can be some grey area. Finally, weighing assets vs. liabilities helps us determine what type of balance sheet strength is present
In weak companies — like Chesapeake Energy (NYSE:CHK) or J.C. Penney (NYSE:JCP) — we’ll see most of these points paint a bleak outlook. In strong companies we’ll see the opposite. So for BYND stock, the company does pretty good.
Revenue continues to grow at a very healthy clip, going from $32.6 million in 2017 to $87.9 million in 2018 to $297.9 million last year. This year Beyond Meat is forecast to do more than $450 million in sales. Gross and operating margins have been expanding, too.
Unfortunately, free cash flow is contracting rather than expanding. That’s not the end of the world, although it’s not ideal. However, the balance sheet is solid. Cash and short-term securities of $246.4 million crush current liabilities of $71.9 million, while total assets of $491.6 million outweigh total liabilities of $99.6 million.
BYND stock is a bit expensive, but it’s swinging from a loss to a profit with expanding margins and robust revenue growth.
In any regard, though, the technicals look great. And over $130, Beyond Meat stock can continue to rise.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, he held no position in any aforementioned securities.
