Editor’s Note: This article was updated on March 7, 2022, to correct the company name.
I’ve always had mixed views on Beyond Meat (NASDAQ:BYND) stock. There’s certainly a great deal to like about Beyond Meat. For example, its burgers are quite tasty, and its brand name has become fairly powerful.
But there’s also a great deal not to like about the company and BYND stock, including the company’s products aside from burgers (I don’t care for them very much), its revenue decline last quarter, and its lack of profits.
In the paragraphs below, I’ll discuss the company’s strengths and weaknesses, then render a verdict on BYND stock.
Beyond Meat’s Strengths
As I suggested in my introduction, I enjoy the company’s burger. I believe that they’re tasty, and I like the idea that they make it easier to feed the world’s ever-growing population. (Cows need a tremendous amount of grass to eat, while only a small amount of pea protein is needed to make Beyond Burgers.).
And more than one stock-picking expert has suggested that buying the shares of companies whose products you use is a good strategy. (That strategy has had mixed results for me, however.)
I’ll also admit that, as someone who is close to my dog and cat, thinking about eating other mammals make me, at times, less than thrilled. I have no doubt that many others have similar feelings.
Moreover, Beyond Meat has had significant success penetrating some restaurant chains; for example, I enjoy eating them at my local Denny’s (NASDAQ:DENN) restaurant and at Boomer Jack’s, a bar/restaurant chain.
Meanwhile in January, McDonald’s (NYSE:MCD) decided to offer the McPlant burger, which it developed in tandem with Beyond Meat, in another 600 of its restaurants. Not to be left behind, Yum Brands’ (NYSE:YUM) Kentucky Fried Chicken last month started selling Beyond Meat fried chicken at all of its U.S. restaurants.
Additionally, as I indicated earlier, I believe that the company has built up a fairly big brand-name advantage over its rivals, with the exception of Impossible Foods, which makes the Impossible Burger.
On Jan. 31, Barclays raised its rating on BYND stock by two levels, saying that the shares are undervalued.
Beyond Meat’s Weaknesses
As I indicated above, I’m not a big fan of Beyond’s products other than their burgers; specifically, I’ve been underwhelmed by its sausage and ground beef plant-based offerings.
Further, as I’ve written previously, the company’s burgers are not very healthy, so I’ve always felt that it could lose a great deal of market share if a competitor developed a burger that was just as tasty but healthier.
Although Beyond Meat’s brand is strong, the company does have many other competitors, including Impossible Foods and Whole Foods’ offerings.
And as many others have pointed out, Beyond Meat is still not profitable. For the fourth quarter, for example, its EBITDA loss, excluding certain items, came in at nearly $63 million. Additionally, its U.S. retail segment revenue, (i.e., its sales to supermarkets and other chains), tumbled nearly 20% year-over-year to $50 million.
Is the Glass Half Full for BYND Stock?
On the other hand, its revenue from the U.S. foodservice segment. (i.e., its revenue from restaurants and their suppliers) surged nearly 35% YOY. And its revenue for all of 2021 came in at $464.7 million, versus $406.8 million in 2020 and $298 million in 2019.
On its Q4 earnings conference call, CEO Ethan Brown said that as the pandemic eases, the company’s revenue growth should accelerate because their customers and consumers will become less impacted by the coronavirus and the firm’s international growth will accelerate.
As far as profitability, Brown said in a statement, “Though we will continue to invest during 2022, we expect to substantially moderate the growth of our operating expenses as we leverage the building blocks we now have in place.”
On the conference call, the CEO added that “We set up some really fantastic opportunities for us to execute against in the next 12 to 18 months, and we’re moving into that phase now.”
The Bottom Line on BYND Stock
Beyond Meat and BYND stock have real potential. If the company’s growth does accelerate and its bottom line improves going forward, the shares will almost definitely rebound. And that scenario could very well unfold as Beyond cuts its costs, grows overseas, and overcomes demand and supply problems caused by Covid-19. Of course, I believe that improvements in its products other than burgers would also be helpful.
The shares used to have a high valuation, but now they’re changing hands at a reasonable 3.9 times analysts’ average 2023 estimates, based on data from Yahoo Finance.
But for now, given Beyond’s Q4 revenue decline, its lack of profitability, and its risks, I view BYND stock as a “show-me” name. If the company shows signs of starting to meet its goals, however, and its valuation does not get too high, its shares could be worth a nibble down the road.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
