Shares in plant-based burger company Beyond Meat (NASDAQ: BYND) have performed poorly over the last year. 12 months ago, the stock was trading near $120. Today, however, it’s at $33.
So, what’s going on here? And has the share price weakness presented an attractive buying opportunity for me?
Why has Beyond Meat stock tanked?
The main reason Beyond Meat shares have fallen recently is that the company’s growth has stalled, and profitability has declined.
This is illustrated by its recent second-quarter results. For the period, net revenue was $147m. This was below the figure of $149.4m generated a year earlier and also below the consensus forecast of $149.2m. Loss from operations came in at $97.1m versus $19.7m a year earlier.
Looking ahead, the company lowered its 2022 revenue forecast to between $470m and $520m (versus $465m last year). Previously, it had projected full-year revenue of $560m to $620m.
As for why the company’s growth has stalled, it comes down to lower demand for its products due to consumers’ budgets. Right now, many consumers are struggling due to high energy costs. As a result, they are trading down to cheaper products. Beyond Meat’s burgers are quite expensive, so it is feeling the impact of this shift.
Is this a buying opportunity?
Are Beyond Meat shares worth buying for my portfolio at $33 a pop? I’m not convinced they are.
Sure, the company’s valuation is a lot more reasonable after the recent share price fall. At present, Beyond Meat has a market cap of just $2.1bn. If the company can generate sales of $500m this year, the forward-looking price-to-sales ratio is only around four.
Yet I think there’s still risk to the downside.
One thing that concerns me here is that demand for plant-based meat appears to be fizzling out. According to data from NielsenIQ, total sales of meat alternatives in the US rose just 0.3% year on year for the 52 weeks to 28 May. Meanwhile, McDonald’s, which has trialled a ‘McPlant’ burger in the US (made with Beyond Meat patties), recently said that it won’t be rolling out these burgers nationally this year due to the fact that sales have not met projections.
Another issue is the rising level of competition in the plant-based meat space. With more competitors now on the scene, Beyond Meat doesn’t really have the capacity to increase its prices. This means it could be hurt by inflation. It’s worth noting that analysts expect the group to post a net loss of $332m this year, nearly double the net loss of $182m posted last year.
A third issue for me is the fact that the stock has a very high level of short interest. At present, about 24.4m Beyond Meat shares are on loan (roughly 40% of the free float). This tells me that hedge funds and other sophisticated investors expect the stock to fall.
Given the uncertainty here, I won’t be buying Beyond Meat shares for my portfolio. To my mind, there are much better growth stocks I could buy today.