Will Beyond Meat Stock Turn Things Around in 2022?

Beyond Meat (NASDAQ: BYND) competes in an increasingly competitive category. In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on March 2, Motley Fool contributors Brian Feroldi and Brian Withers talk about whether Beyond Meat will be able to sustain and rebound in 2022, and discuss what the future might look like for the plant-based meat company.

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Brian Feroldi: Moving on to Beyond Meat, ticker symbol B-Y-N-D. This company recorded a decline of 1% in the fourth quarter. Yes, a decline and the details are worth diving into there. Here is the company’s fourth quarter results. What caused it? This line item here, U.S. retail sales were down 20% to $50 million. As you can see, it is the company’s most important segment. Food services was up. International business was up decently. But, it’s the U.S. retail business that caused the decline there, just overwhelmed the rest of it. Now, what happened there? Well, management blamed the COVID shortfall, and that makes sense because it was raring its ugly head in the United States. They also called out an increase in trade discounts and a loss of market share. Ouch. This is a company that competes in a growing competitive market but the market itself is growing. What is the thing that’s going to protect this company from its competitors? Well, distribution and brand and it’s a really bad sign that the company is losing market share, so that is not good at all. Now, management wrote off $3.7 million worth of inventory during the period due to COVID. Because of that, the company’s gross margin plunged on a GAAP basis to 14%. That was down 1,080 basis points again, mostly due to the one-time write-off. Now, while the top line result was weak, gross margin is plunging. The company is moving forward with its growth spending. Operating expenses doubled to $92 million mostly because of a big jump in SG&A spending. You add those things together and this company’s net loss ballooned to $80 million or a $1.27 per share. Now, they do have $733 million in cash, so they can afford a couple of more quarters like that if they chose to. They do have the balance sheet to continue to invest, but that’s an ugly number. Now, management does believe that the worst effects of COVID are behind them and that they will return to growth in 2022. Revenue is expected to rise 20% to 23% in the first quarter. They also believe that their spending rates will subside substantially in 2022, so that they can leverage the investments that were made in 2021. The bottom line losses should improve dramatically for the business. The jury is still out whether or not the company can actually execute on them, but management is still bullish on this business for the long term.

Brian Withers: Brian, this is one of those products that I’m not a really big fan. As an investor, I’m torn. Have you invested in companies where you don’t like the product or the offering? If so, any advice on how you separate your personal experience with that of the company’s performance?

Feroldi: Yes, I have invested in companies that I don’t personally like or use the product before and Beyond Meat is a company that I am completely rooting for, for so many perspectives. I actually think that plant-based meat is an incredibly attractive category and will reap huge benefits to society. Whether that translates into huge benefits for investors, it’s an entirely different question. If I was to invest in this category, I would invest in Impossible Foods, which is not yet on the market. That’s a brand name that I personally like the best and I’ve tried many of these companies’ products. My family likes Impossible Foods. It’s the best. So, that is a company I will be looking at very closely. Beyond Meat’s growth and their recent numbers are certainly lackluster and the words, loss of market share and trade discounts, just send shivers down my spine.

Withers: Yeah, I totally get that.

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Brian Feroldi has no position in any of the stocks mentioned. Brian Withers has no position in any of the stocks mentioned. The Motley Fool owns and recommends Beyond Meat, Inc. The Motley Fool has a disclosure policy.

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