Title: The 18% November Slump of Beyond Meat Examined
Beyond Meat's shares took a hit last week, losing 18% in November after the plant-based meat producer reported disappointing third-quarter earnings. The downturn, as shown in the chart below, started with the earnings report and persisted even as the broader market rallied following the election and economic data improvements.
The business managed to post Q3 growth, but the performance didn't exactly spark hopes for a swift recovery. Wall Street wasn't thrilled, prompting a 11% decrease in the stock price on November 7.
Revenue inched up by 7.6% to $81 million, surpassing the consensus of $80.7 million, but the international segment struggled, with a 2% revenue drop to $31.6 million. On the bright side, their gross profit improved from a loss of $7.3 million to $14.3 million, translating to a 17.7% gross margin, and their EBITDA loss shrank from $57.5 million to $19.8 million due to cost-cutting efforts.
On the financial side, their loss per share narrowed from $1.09 to $0.41, edging slightly ahead of the consensus of $0.44. CEO Ethan Brown highlighted their progress in an upbeat tone: "We returned to growth, increasing net revenue while expanding gross margin and reducing operating expenses on a sequential and year-over-year basis."
Despite the minor victory, the stock couldn't quite capitalize on the market's upswing for the remainder of the month. To make matters worse, management reduced their full-year revenue forecast to a range of $320 million to $330 million, from the previous range of $320 million to $340 million. They didn't provide an outlook on bottom-line expectations.
Beyond Meat's momentum seems to be slowing down. Their total distribution outlets have decreased from 137,000 in the previous year to 129,000, which could signal dwindling demand for their products. If they cannot tighten their cost structure or attract a new customer base, the stock may continue to underperform.
The company has faced financial challenges in spite of some promising indicators. Their revenue has declined, and they continue to incur significant losses. Moreover, they've had problems with negative free cash flow, and while they've made strides in improving their gross margin, they still encounter operational efficiency issues.
Investor sentiment is jaded as well, with Beyond Meat's stock heavily shorted and having a skeptical GF Score of 48. Their Altman Z-score places their financial health in the Distress zone, and their Piotroski F-Score suggests weak financial health, which doesn't instill confidence in potential investors.
In light of the financial challenges, investors might be hesitant to invest more money in Beyond Meat's finance sector. The company's recent earnings report and disappointing performance have raised concerns about its future growth potential.
