Beyond Meat Stock Up 10% Today – Time to Buy BYND Stock?

The price of Beyond Meat stock is up 10% this morning in pre-market stock trading action following reports that KFC – a company owned by Yum! Brands – will be launching a plant-based fried chicken menu nationwide next Monday.

The two companies have been collaborating for many years to incorporate a plant-based menu for the different brands owned and operated by Yum! including Pizza Hut and Taco Bell.

“We couldn’t be prouder to partner with KFC to offer a best-in-class product that not only delivers the delicious experience consumers expect from this iconic chain, but also provides the added benefits of plant-based meat”, said Ethan Brown, the Chief Executive Officer of Beyond Meat in a statement released this morning.

For Beyond Meat, the nationwide launch of this product could be great news as the company has been struggling with sluggish retail demand in the United States.

What could be expected from this vegan stock after this interesting development? In this article, I’ll be assessing the price action and fundamentals of BYND stock to outline plausible scenarios for the future.

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Beyond Meat Stock – Technical Analysis

The sharp decline that BYND stock has suffered lately seems to have taken a breather in the first few days of 2022 as the price has still not made a lower low.

Thus far, the $60 level seems to be acting as a key short-term support for Beyond Meat stock and today’s pre-market uptick could solidify that area as a potential trampoline for an upcoming uptrend.

That said, it is important to quantify the extent of the impact that this deal with KFC could have on Beyond Meat’s future financial performance before jumping to conclusions about how the price could behave in the next few sessions.

From a purely technical perspective, not much would change if this pre-market jump materializes during the live session as the stock will still be trading below its short-term and mid-term moving averages.

That said, momentum indicators have been recovering in the past few weeks with both the MACD and the Relative Strength Index (RSI) posting a mild bullish divergence that could justify a short-term jump in the stock price.

For now, as I stated in my previous article about BYND, unless the price moves above the 50-day simple moving average, the outlook for BYND remains neutral-to-bearish in the short term.

On the other hand, if today’s development does catalyze the beginning of an uptrend for BYND stock, confirmation of such a move would be obtained if the bearish price gap left behind in November last year is filled.

Beyond Meat Stock – Fundamental Analysis

It is unclear how much money this partnership will generate for Beyond Meat exactly. The price of the Beyond Fried Chicken menu at KFC starts at $6.99 excluding taxes and 6 and 12-piece presentations are currently being offered to consumers.

The management team stated that they “feel really good” about the logistical aspect of the deal.

Aside from the financial impact, from a branding perspective, the deal is also positive for Beyond Meat as more consumers will be exposed to the company’s products and will try its faux meat alternative.

If the product is good enough to entice a large audience, retail sales could be impacted positively by this partnership as well.

The market seems to be excited by what this deal means for the company and the management will likely discuss its full impact on an upcoming conference call.

At its market capitalization of $4.2 billion – including this morning’s 10% uptick – the company is being valued at nearly 7 times its forecasted sales for 2022.

In the past 12 months, the firm has burned around $320 million in cash while its cash reserves stood at $886 million by the end of the third quarter of 2021.

In March last year, Beyond Meat raised $1 billion in debt via convertible senior notes carrying zero interest. As a result, the firm’s long-term debt grew to $1.13 billion while total assets stand at $1.43 billion including the cash reserves cited above. The notes expire in 2027.

Moving forward, the company will probably have to raise more capital to finance its expansion projects. Therefore, dilution risks seem elevated at the moment and that makes the current valuation unattractive from a fundamental standpoint.

Even though this deal with KFC could push the firm’s sales higher in the following years, the company’s financial situation is a bit fragile and its growth prospects do not offset the dilution risks that existing investors are currently facing.

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