If the stock price of Beyond Meat Inc. (NASDAQ: BYND) is any indication, the plant-based meat boom has come and gone. The stock peaked at a whopping $239.71 in July 2022 and has since withered away to an all-time low of just $5.20 on Aug. 5, 2024. Despite losing 97.4% of its value from the highest, there is still a giant short interest of 38.96%, indicating the bears see more downside to come. Bullish investors, on the other hand, are hoping for the turnaround strategy to gain momentum, and the news of a whole-muscle steak alternative may be a catalyst.
Beyond Meat operates in the consumer staples sector, competing with meat producers, including Tyson Foods Inc. (NYSE: TSN), Hormel Foods Inc. (NYSE: HRL) and Pilgrim’s Pride Co. (NASDAQ: PPC).
The 2 Biggest Complaints About Plant-Based Meat
The appeal of plant-based meat is its sustainability, animal welfare, health benefits, and reduced risk of potential food-borne illnesses. However, the two biggest complaints are the cost and the taste. Plant-based meats cost more to produce due to the extensive raw materials and processing they require.
As for the taste, it may be subjective, but in terms of texture and flavor, most agree that there is no perfect substitute for meat. This has been a constant problem with Beyond Meat’s offerings. Recent price hikes haven’t helped on the cost front, but the company is rolling out a new whole-muscle steak alternative. The taste factor will only be tested when the product is released.
Adding Beef and Steak Has Been a Game Changer for Fast Casual Restaurants
Adding beef and steak options to the menu has helped many fast-casual restaurants bolster YoY comps. Sweetgreen Inc. (NYSE: SG) boosted same-store sales comps to 9% after adding its Caramelized Garlic Steak option to its menu in its second-quarter 2024 earnings release, causing shares to surge 30%. CAVA Group Inc. (NYSE: CAVA) is also seeking a strong reception to the grilled steak addition to its menu as it saw comps grow an eye-watering 14.4% in its second quarter.
Beyond Meat’s Turnaround Strategy
In its fourth-quarter 2023 earnings release, Beyond Meat detailed its turnaround strategy. The company is prioritizing sustainable growth, focusing on profitability and cash flow, and shifting away from aggressive growth. They plan to optimize production and distribution in alignment with demand. The company will also implement lean manufacturing processes to help streamline its production and enhance margins. The company will strengthen its brand, focusing its marketing on the health benefits of its plant-based meats and offering more premium offerings like lean-muscle steak. Lastly, Beyond Meat wants to grow its expansion into international markets, where it's seeing broader acceptance of its products.
Beyond Meat Slows the Rate of Degradation, Which Is a Plus
Shares of Beyond Meat nearly doubled following its second-quarter 2024 earnings release. The company reported an EPS loss of 53 cents, beating consensus estimates for a loss of 83 cents by 30 cents. Revenues fell 8.8% to $93.2 million, driven by a drop in volume sold partially offset by price hikes. Revenues still beat consensus estimates by $5 million. Adjusted EBITDA was a loss of $23 million but improved over the $40 million loss in the year-ago period, which was negative 40% of net revenues.
United States food service revenues fell 18.9%, while the retail channel saw a 7.5% YoY drop in sales. Beyond Meat sold 23.1% less product in the United States in Q2 2023, whereas international sales fell just 5% and just 1.4% in international food service.
Beyond Meat Issues In-Line Guidance
The company provided in-line guidance for full-year 2024 revenues of $320 million to $340 million, from prior forecasts of $315 million to $345 million, versus $321.75 million consensus estimates.
Beyond Meat CEO Ethan Brown commented, "We are pleased to report a strong quarter of progress against our 2024 plan, a pivotal year on our path to sustainable operations and profitability. Key proof points include exceeding our Q2 revenue guidance, continued reduction in operating expenses and cash consumption, and our best quarterly gross margin since Q3 2021.”
Brown added, "Further, we firmly reiterated our center-of-the-plate position in the global health and wellness trend with the launch of our Beyond IV platform.”
BTIG Reiterates Its Neutral Rating
Incidentally, BTIG Research commented after meeting with management that the company had made "significant" progress in terms of product quality, notably with its burger and sausage offerings, but still hasn't "cracked the code" on consumer adoption. The declining volumes, uncertain financial outlook, and the likely potential for a capital raise were factors behind maintaining its Neutral rating.
BYND Stock Is in a Symmetrical Triangle Pattern
The symmetrical triangle is comprised of a falling upper trendline resistance converging with a rising lower trendline support. As the channel between the two trendlines gets tighter, a breakout above the resistance or breakdown below the support will ensue.
BYND shares reminded bears of how volatile its near 40% short float was when shares nearly doubled in the two days following its earnings release, as BYND peaked at $9.24 after closing at $5.24 just before the release. BYND fell back under the descending upper trendline and into the symmetrical triangle range quickly afterward. The daily relative strength index (RSI) is chopping sideways around the 50-band. Fibonacci (Fib) pullback support levels are at $5.12, $4.69, and $4.12.
Beyond Meat’s average consensus price target is $5.19, and its highest analyst price target sits at $7.00.
Bullish investors can buy on pullbacks using cash-secured puts at the fib pullback support levels to buy the dip and write covered calls to execute a wheel strategy for income.
Bullish options investors can limit maximum downside and profit from potential stock price gains with less capital than owning the stock by implementing a bullish call debit spread.
