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Bear of the Day: Beyond Meat (BYND)

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Beyond Meat (BYND - Free Report) is a Zacks Rank #5 (Strong Sell) that manufactures, markets and sells plant-based meat products. The stock has been a high flyer since its IPO in 2019, but recent earnings has investors licking their wounds.

About the Company

Beyond Meat is headquartered in El Segundo, CA and employs 472 people. The company was founded in 2009 and sells its products through grocery stores, mass merchandisers, direct to consumer, schools and restaurants.  

BYND is valued at $7.8 billion and has an off the chart valuation. The company holds a Zacks Style Score of “F” in both Value and Growth.

Q3 Earnings

The company announced earnings earlier in the week, seeing a big miss on both the top and bottom lines. Revenues came in at $94.4M v the $136M expected and the company missed EPS by 1033%. The company suspended its outlook as it continues to struggle due to COVID-19. Here are some comments from the company:

Due to the COVID-19 pandemic, the Company continues to experience a meaningful slowdown in its foodservice business as stay-at-home advisories and restrictions on foodservice locations’ operating capacity have resulted in closures or significantly curtailed operations of many of its foodservice customers. At the same time, the surge in demand from retail customers that characterized the early stages of the pandemic as consumers shifted towards more at-home consumption has moderated as panic-buying generally has subsided.

The tailwind in retail has stopped and now the company is seeing a double whammy in revenues. The drop off in sales came with a gross margin that fell to 28.9% v 35.6% last year.

 

Valuation and Stock Plunge

Beyond Meat is priced in for big growth, so when the company reports a big miss like it did this week the valuation has to be reassessed. After earnings were announced, the stock fell after hours from $155 to $105. The stock has rallied off the lows, but investors will be in a tough spot as the high valuation will be a hurdle.

Estimates

Analysts are already starting to adjust their numbers. For next quarter, estimates have fallen from $0.14 to $0.10, or 40% over the last week.

There is hope for the future as analysts think BYND can bounce back if the atmosphere normalizes. 2021 estimates are still flat, but investors might star to get antsy in the meantime, which could lead the stock back below $100.  

In Summary

When a growth company stops growing, there is trouble. Yes, there is a pandemic getting in the way, but until Beyond Meat can prove they are back on track, that valuation will be questioned. I expect shorts sellers to pile into the stock try to take the stock back under the $100 level.

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