Beyond Meat Stock Up 5% Today – Time to Buy BYND Stock?

Beyond Meat stock is going up 5% in pre-market stock trading action this morning following some bullish comments from analysts at Piper Sandler in regards to the fruitfulness of the firm’s collaboration with McDonald’s.

In a report released yesterday, Michael Lavery from Piper stated that sources from within the industry are confident that the fast-food giant will launch its McPlant burger nationwide during the first quarter of 2022 – a bit earlier than the market had expected.

Estimates from the analyst indicate that the company could bring in around $75 million from the deal – a figure that represents around 18% of the company’s total sales in 2021 and that could reverse the downtrend that US sales have been experiencing in the past few quarters.

As a result, Piper Sandler boosted its price target for BYND stock from $61 to $64 while it upgraded its price target from Sell to Hold.

In other news, Beyond Meat announced on 8 December that it appointed Doug Ramsey as the firm’s Chief Operating Officer following the unexpected departure of Sanjay Shah, who stepped down from the role back in September this year.

Mr. Ramsey is a food industry veteran who served for three decades at Tyson Foods, overseeing the company’s poultry and McDonald’s business. His appointment comes at the same time that rumors about the imminent nationwide launch of the McPlant are circulating.

Along with Ramsey, the company also appointed Bernie Adcock as its Chief Supply Chain Officer. Mr. Adcock is also a former Tyson Foods executive who has extensive experience in the industry. He will be reporting directly to Mr. Ramsey.

Could these latest developments help BYND stock reverse its long-dated downtrend? In this article, I’ll be assessing the price action and fundamentals of this faux-meat stock to outline plausible scenarios for the future.

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Beyond Meat Stock – Technical Analysis

In my latest article about Beyond Meat, I emphasized that the strong decline that occurred back in early November after a disappointing quarterly report favored a bearish outlook for the stock.

As I mentioned back then, a break below the $90 level was dangerous for the stock and increased the downside risks significantly. That is exactly what has happened so far as the stock has declined to $63 per share as of yesterday even though it is slightly recovering during this morning’s pre-market action following Piper Sandler’s remarks.

Depending on what happens in the following sessions, it is possible that BYND stock could rebound from these lows as the Relative Strength Index (RSI) seems poised to post a bullish divergence while the MACD has just crossed above the signal line even though it remains in negative territory.

Moving forward, the outlook continues to be bearish unless the price action manages to close the open gap left behind in November after the firm released its Q3 earnings report.

If that does not happen, chances are that this could be a short-lived rebound resulting from oversold technical readings. If that is the case, the stock may be poised to continue its downward path with the next two most relevant support areas to watch found at the $58 and $49 levels.

Beyond Meat Stock – Fundamental Analysis

For Beyond Meat, turning around the current downtrend that its US business is experiencing is crucial to regain the market’s confidence.

During the first nine months of the year, US retail sales retreated 4.3% while foodservice sales rose 22.9%. This resulted in a meager 1% advance in the company’s top-line results in the country.

Even though international sales are booming, these sales carry lower top-line profitability due to the logistics involved in shipping BYND’s products overseas.

This deterioration in the company’s gross margins amid the lower contribution of US sales to the mix has already surfaced during these first nine months as gross margins went down 290 basis points during that period compared to the first three quarters of 2020.

At its current market capitalization of $4 billion, the firm is being valued at 6.5 times its forecasted sales for next year.

The deterioration of the firm’s top-line margins may make it even more difficult for the business to produce positive bottom-line results down the road and the collaboration with McDonald’s and the launch of the McPlant may not do too much on this particular front as gross margins will probably be thin.

Meanwhile, in the past twelve months, the company has shed nearly $330 million in cash and its ambitious expansion projects may force the management to raise more capital next year. It seems unlikely that the firm will raise more money through debt, which leaves the management with the sole option of raising more money through a stock offering. This exposes existing shareholders to dilution risks.

All things considered, the mid-term outlook for BYND stock based on the technical and fundamental factors discussed above remains bearish.

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