Beyond Meat Stock Down 26% Today – Time to Buy BYND Stock?

The price of Beyond Meat stock is plummeting over 26% this morning in pre-market stock trading action as the company disappointed analysts after missing on both revenue and earnings estimates for the first quarter of the 2022 fiscal year.

During the three months ended on 2 April, the faux meat producer reported sales of $109.5 million resulting in a 1.2% increase compared to the same period a year ago. However, foodservice revenues in the United States experienced a 7.5% decline at $16.74 million that was offset by a 6.9% increase in retail sales in the country.

As for the company’s international operations, sales in both the retail and foodservice segments experienced 6.2% and 8% declines respectively compared to a year ago. The consensus estimates from analysts for Beyond Meat’s total revenues stood at $111.6 million.

Notably, the company’s gross margin deteriorated significantly as it landed at 0.2% resulting in a 3,000 basis points drop compared to the same period a year ago amid the introduction of Beyond Meat Jerky – a product that, according to the management, “utilizes a complex and high-cost manufacturing process”.

The company also cited increased trade discounts, higher manufacturing costs per pound, and higher logistics costs as the leading causes for this sharp drop in its top-line profitability.

As a result, operating and net losses for the period expanded by nearly four times compared to Q1 2021 at $97.6 and $100.5 million respectively. Meanwhile, net losses on a fully diluted per-share basis stood at $1.58 or 61 cents higher than the consensus estimate from analysts.

During this period, the company reported negative free cash flows of $186.7 million and cash and equivalents of $547.9 million.

For the entire 2022 fiscal year, the company is expected to report sales in a range between $560 and $620 million. The mid-point of this estimate was slightly higher than the market’s consensus estimate but the upper bound was sharply lower as per data compiled by Seeking Alpha.

In summary, the deterioration of the firm’s top-line margins and its inability to live up to the market’s expectations for both earnings and revenues are probably the reason why Beyond Meat stock is declining so sharply today.

What could be expected from this vegan stock after the release of this quarterly report? In this article, I’ll be assessing the price action and fundamentals of Beyond Meat stock to outline plausible scenarios for the future.

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Beyond Meat Stock – Technical Analysis

So far this year and prior to this morning’s downtick, the price of BYND stock was already accumulating a 60% decline as the company’s fundamentals have kept deteriorating at the same time that market sentiment made a U-turn due to changes in the macroeconomic environment.

Meanwhile, if today’s decline spills over to the live session as is, the stock will book a 70% loss in 2022 while BYND will trade 88% below its 52-week high and 75% below its 200-day simple moving average.

This decline has plugged the price back into the descending price channel highlighted in the chart and it may leave another bearish price gap behind that will favor the continuation of the downtrend moving forward.

Momentum indicators are also standing in bearish territory as the Relative Strength Index (RSI) has drifted to oversold levels for the second time in less than 2 months while the MACD just crossed below the signal line and remains neck-deep into negative territory.

Beyond Meat Stock – Fundamental Analysis

Based on Beyond Meat’s projections for 2022, the company will now be valued at just 2 times its forecasted sales if this morning’s pre-market downtick spills over to the live session as is.

Even though this multiple seems low, the fact that the company’s fundamentals have deteriorated so much justifies the decline. First, sales in one of the most important segments in terms of growth in the US decelerated this quarter. Second, international sales, another segment that gave investors hope about the future, also delivered catastrophic results.

Moreover, the business’s cash burn has expanded amid the deterioration of the firm’s top-line margins and that is endangering the financial feasibility of Beyond Meat in an environment where finding fresh financing might be difficult if investors start to perceive an elevated risk of insolvency.

All things considered, Beyond Meat’s business model remains weak and the latest shift in macroeconomic conditions is catching the company at a bad time. In addition, the management was unable to deploy its $1 billion war chest in a way that strengthened the business and now finding cheap money might not be as easy – or even possible – as it was last year.

All things considered, even at a forward P/S multiple of 2x, Beyond Meat may still be overvalued if one considers the odds that the firm could go under water – which are now probably higher than ever.

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