Beyond Meat Stock Crushed but Offers Hope for Future

Beyond Meat Stock Crushed but Offers Hope for Future
iStock.com/Say_cheese

BYND Stock Collapse

The stock market can be unpredictable, but sometimes it’s easy to see a stock’s future as clear as day.

Just recently, I wrote about Beyond Meat Inc (NASDAQ:BYND) and the tough times that lay ahead. Since then, well, Beyond Meat stock is down, falling almost 20% in one day.

Its immediate fall was anything but unpredictable, but now that the worst of the drop is potentially over, is there hope for this stock?

First let’s discuss what just happened with BYND stock and why it plunged so savagely.

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Chart courtesy of StockCharts.com

The major problem affecting Beyond Meat stock was the conclusion of its lockup period on October 29. A good portion of approximately 48 million shares (about 80% of the shares outstanding) are now eligible to trade freely on the public market.

Considering the chart above, shareholders wanted to lock in their investments with as high of a return as possible before a continued collapse could damage them further. The result was a huge decline for BYND stock.

“Given the dramatic appreciation since the initial public offering (IPO), we expect many insiders and private equity funds to cash out, putting further downward pressure on the stock,” wrote Arun Sundaram of CFRA Research on October 21. (Source: “Beyond Meat Insiders Will Finally Be Able to Cash in Their Shares Next Week,” Markets Insider, October 21, 2019.)

I agreed. And now we were proven right.

Beyond Meat stock’s precipitous drop was made all the more swift, due to something that any extremely successful initial public offering has to fear: overvaluation.

The stock saw such amazing gains in its early days on the public market that a backlash in the form of a downturn was near-inevitable. The question was always regarding how severe the downturn would be.

I mean, there was a $672.0-million short-seller position in BYND stock, so I wasn’t the only one foreseeing a dramatic fall in the company’s future. (Source: Ibid.)

In this case, the fall was bad but not debilitatingly so. Which is to say there is hope remaining in Beyond Meat stock, even if investors may have to suffer through some tough times to find it.

Beyond Meat Quarterly Report

Right now, the question is whether BYND stock can bounce back. In my mind, the company is more than equal to the task.

Take, for instance, the most recent Beyond Meat quarterly report. It contained good news for the company (even if it wasn’t enough to ward off the stock-price collapse).

Net revenues were $92.0 million, up 250% from the previous year. Gross profit was $32.8 million (35.6% of net revenues), compared to $5.0 million (19.2% of net revenues) the same time a year prior. (Source: “Beyond Meat Reports Third Quarter 2019 Financial Results,” Beyond Meat Inc, October 28, 2019.)

Net income was $4.1 million ($0.06 per diluted common share), compared to a net loss of $9.3 million ($1.45 per common share) in the previous year. Adjusted EBITDA was $11.0 million, compared to an adjusted EBITDA loss of $5.7 million in 2018.

Those numbers show massive growth and a solid path toward strong recurring revenue streams and a steady inflow of cash.

Meanwhile, the company continues to nab deals around the world, with the latest potential partnership being with McDonald’s Corp (NYSE:MCD). Signing a deal with McDonald’s could mean a huge new revenue stream for Beyond Meat Inc.

So the company’s outlook from a pure financial standpoint is very strong. So strong, in fact, that I believe Beyond Meat stock has the ability to bounce back from its recent calamitous showing.

“We are very pleased with our third quarter results which reflect continued momentum across our business and mark an important milestone as we achieved our first ever quarter of net income,” said Ethan Brown, Beyond Meat’s President and CEO.

“We remain focused on expanding our distribution footprint, both domestically and abroad, building our brand, introducing new innovative products into the marketplace, and bolstering our infrastructure and internal capabilities to fuel our future growth.” (Source: Ibid.)

The fact of the matter is that BYND stock did not collapse because the company was doing anything wrong—quite the opposite. The stock was punished because Beyond Meat Inc had simply grown too much, too fast, leaving investors uncomfortable.

Combine that with a huge number of BYND shares being made available to trade—and with many investors wanting to lock in extremely high post-IPO gains (even with the downturn)—and you have a perfect storm that wrecked Beyond Meat stock.

What’s good though is that the perfect storm could have been a lot worse. Sure, a plummet of almost 20% is no one’s idea of a good day, but the stock was faced with doomsday scenarios that haven’t come to pass (yet).

Which is to say that more falls may be on the way for BYND stock. But right now, investors have the opportunity to buy the dip and play the long game on this meat-alternative stock.

I don’t quite think that Beyond Meat stock has hit its nadir (although I’m not certain), and I could see the stock continuing to fall for a few weeks or months yet.

But I do foresee a strong turnaround in this stock’s future. It could come tomorrow or it could come next year, but there is no doubt in my mind that there is still money to be made from BYND stock.

Analyst Take

Beyond Meat stock just took a shellacking; that’s without question. But the future of this stock is very much alive.

Circumstances orchestrated themselves in such a way that a huge fall was inevitable for BYND stock. But now that the worst may be over, there’s a chance that nothing but gains lie on the horizon.

This could give investors who were late to the party a second chance at eking out profits.