beyond meat (by 0.00%), one of the world’s largest producers of plant-based meat products, went public at $25 a share in May 2019. Its shares opened at $46 on day one, hit an all-time high of $234.90 two months later, and subsequently fell back to $30.
At its peak, Beyond Meat’s stock was valued at $14.1 billion, or 47 times the revenue it would generate in 2019. Today, it’s worth just $2.2 billion, or four times the revenue it’s expected to generate. generate in 2022. valuation make it a more attractive investment?
Reading: Beyond meat investment
why did the bulls give up beyond meat?
Beyond meat stocks crashed for three simple reasons. First, the company’s lack of earnings and a frothy price-to-sales ratio made it an easy target for bears as interest rates rose.
Secondly, beyond meat’s growth cooled after its public debut. its revenue increased 239% to $298 million in 2019 as more retailers and restaurants agreed to sell its plant-based meat products.
But in 2020, its revenue rose just 37% to $407 million, as the pandemic slowed the growth of the foodservice division, which generated more than a quarter of its revenue. The growth of its retail division, which sells its products through large retailers such as walmart, partially offset that slowdown.
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In 2021, its revenue increased by just 14% to $465 million, dashing hopes of a quick post-lockdown recovery. It attributed that slowdown to a “temporary halt” to its US retail growth. US, with consumers focusing more on “comfort foods” rather than health-oriented options, and retailers and restaurants canceling trials of their products as delta variant spread.
Finally, beyond meat remained profoundly unprofitable as it faced a growing number of competitors. its net loss narrowed from $29.9 million in 2018 to $12.4 million in 2019, but then widened to $52.8 million in 2020 and more than tripled to $182.1 million in 2021.
Its biggest rival, Impossible Foods, remains private and was valued at $7 billion after its last funding round. as long as the impossible remains private and attracts more funding, it can afford to continue expanding at a loss to further widen its moat against beyond the flesh.
Meat industry giant tysonfoods (tsn 0.22%) also started launching its own plant-based meat products last year. During his fourth-quarter conference call in February, CEO Ethan Brown admitted that “competitive activity in U.S. retail has intensified in 2021, marked by frequent aggressive discounting and new entrants to the category.”
2022 could be another challenging year
During that same call, Beyond Meat predicted that its growth would accelerate again in 2022 as it expands its reach with new products, like Panda Express’ beyond the original orange chicken, beyond the Italian sausage crumbles in yum! brand pizza hut locations in canada, beyond the fried chicken at kfc locations of yum! in the united states, mcplant burgers at mcdonald’s and beyond beef jerky through its planetary partnership joint venture with pepsico. it also planned to continue its expansion in europe and asia.
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But in the first quarter of 2022, beyond meat’s revenue was up just 1% year over year to $109.5 million as its net loss widened from $27.3 million to $100.5 million. the number of products sold rose 12% year-over-year, but those higher shipments were offset by a 10% decline in net revenue per pound, which it attributed to markdowns and currency headwinds. Brown once again said that beyond meat faces “increased competition” in the plant-based meat market.
Will it stabilize beyond the meat business?
Beyond the slowdown in growth and the ever-increasing losses of meat, warning signs are going on for its business model. It relies heavily on letting restaurants and retailers “try” its products at deep discounts, but most of its competitors have adopted the same loss-making tactics. at the same time, their costs are rising amid inflationary and supply chain headwinds.
however, beyond meat still believes they can increase their revenue by 21%-33% over the entire year. analysts expect its revenue to rise 22% to $567 million, but its net loss to widen again to $279 million. even on an adjusted ebitda (earnings before interest, taxes, depreciation and amortization) basis, they expect their net loss to widen from $113 million to $219 million.
Ended the first quarter with just $548 million in cash and cash equivalents and a staggering debt-to-equity ratio of 28.1. that low liquidity and high leverage, which comes primarily from $1.13 billion in senior convertible notes due 2027, will make it difficult for the company to raise new funds at favorable rates.
This is not the right time to buy beyond meat
beyond meat shares appear to be more reasonably valued than in the past, but its future path remains highly uncertain. its slowing growth and ugly balance sheet are likely to keep the bulls at bay, and it will remain out of favor until it significantly stabilizes its business. For now, investors should stick with more resilient packaged food stocks.
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