Beyond Meat (NASDAQ:BYND) stock plunged in early November after the plant-based meat maker reported third quarter revenues and profits that came in sharply below expectations.
Specifically, Beyond Meat revenues missed consensus estimates by nearly 30% — and grew just 3% year-over-year, a sharp deceleration from last quarter’s 69% growth rate. The company was also supposed to report a slight profit in the quarter. Instead, lower revenues led to a wide loss.
There’s no way of sugarcoating it. The numbers were ugly. No wonder BYND stock fell by 20%.
But, upon close examination, the headwinds which killed Beyond Meat in Q3 are transitory in nature. They will pass, and soon. Meanwhile, the core fundamentals underlying the business and the company’s long-term growth potential remains robust.
In other words, the Covid-19 pandemic will pass, and plant meat is still the future, so buy the dip in BYND stock.
Here’s a deeper look.
Ephemeral Covid-19 Headwinds
Beyond Meat’s third quarter numbers were awful for one reason and one reason alone: Covid-19.
Specifically, in the second quarter of 2019, Beyond Meat was able to weather a shutdown of fast food chains and restaurants because of abundant consumer bulk buying at grocery stores.
But, in the third quarter, that bulk buying moderated. At the same time — while some fast food chains did open up and recover in Q3 — Beyond’s quick-service business remained largely depressed because two-thirds of that business comes from non-traditional locations that have remained closed, like casinos, local bars and pubs, sports venues, etc.
Beyond Meat was basically hit by a perfect Covid-19 storm in Q3, which led to rapid retail revenue growth deceleration and a muted recovery in food-service revenue growth.
That storm won’t last.
Pfizer (NYSE:PFE) just announced that its Covid-19 vaccine candidate is proving to be 90% effective — miles better than the 50% to 70% efficacy most were expecting. There are also expectations for this highly effective vaccine to start making the rounds later this year, with mass distribution expected by mid-2021.
Thus, the stage is set for rapid economic normalization over the next 12 months.
Restaurants. Fast food chains. Casinos. Bars. Pubs. Sports venues. They’ll all open back up. As they do, Beyond’s big Covid-19 headwind will pass — and BYND stock will rebound.
Plant Meat Is still the Future
Zooming out, the long-term fundamentals supporting BYND stock remain highly favorable.
That is, the weight of evidence still suggests that plant meat is the future, while Beyond Meat is doing everything right to secure leadership position in this market.
An increasingly large number of health-conscious, pro-environment and animal-hugging consumers are rapidly shifting towards plant meat consumption, because plant-based meat is obviously better for animals (we don’t have to slaughter pigs or cows), better for the environment (cows produce more CO2 emissions than cars in Europe), and will soon be better for your health (today, plant-meat isn’t as healthy as high-quality animal-meat, but improvements in plant meat science will inevitably improve the health of plant meat over time to a point where it will be far healthier than animal-meat).
Plus, plant meat will be way less costly to make at scale, since it is a repeatable process with cheap ingredients that can be performed continuously in a single lab, while animal-meat requires upkeep and maintenance of a huge farm with thousands of cows, chickens and pigs.
Big picture: for a myriad of reasons, plant meat is the inevitable future of the $1.4 trillion global meats industry. The Covid-19 pandemic didn’t change this reality.
Furthermore, Beyond Meat continues to do everything right to secure its leadership position in this booming market. The company is winning more fast food partnerships (they recently signed a deal for plant pizza with Pizza Hut), creating new products (a new iteration of the Beyond Burger is due soon), expanding retail distribution (Beyond products are coming to CVS (NYSE:CVS) for the first time ever), and pushing aggressively into international markets.
All in all — despite ugly Q3 results — Beyond Meat still projects as the leader in what will one day be an enormous plant-based meat space. That means near-term weakness in BYND stock is nothing more than a golden buying opportunity for long-term investors.
Bottom Line on BYND Stock
Beyond Meat’s earnings weren’t pretty. But they aren’t the norm. The quarter was an anomaly thanks to transitory Covid-19 headwinds. Those headwinds will pass, and soon — likely over the next few months. Once they do, Beyond Meat’s growth trajectory will meaningfully recover, because plant-meat continues to project as the future of global meats consumption, while Beyond Meat continues to project as the leader in the plant-meat category.
Long story short, buy the dip in BYND stock. You won’t be sorry.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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