Beyond Meat (NASDAQ: BYND)

Shares of Beyond Meat (NASDAQ: BYND) plunged 24.23% in Thursday’s pre-market trading as the plant-based meat maker missed the Street’s Q1’22 expectations and reported a higher-than-anticipated loss.

Beyond Meat shares have declined nearly 60% so far this year (as of May 11) as investors are concerned about mounting losses and slowing sales growth.

Despite supply chain and labor challenges, Beyond Meat reaffirmed its full-year revenue outlook in the range of $560 million to $620 million, reflecting a 21% to 33% growth.

Q1 Results in Detail

Beyond Meat’s Q1’22 net revenue grew 1.2% to $109.5 million, lagging the Street’s estimate of $112.4 million. Revenue growth was driven by increased volumes partially offset by a decline in net revenue per pound, due to higher trade discounts, price reductions in the European Union, unfavorable sales mix, and currency headwinds.

Sales through the U.S. foodservice as well as international retail and foodservice channels fell on a year-over-year basis. However, the U.S. retail channel revenue rose 6.9% driven by the introduction of Beyond Meat Jerky, partially offset by lower sales of other products.

The launch of the plant-based Jerky significantly dragged down Q1’22 gross margin to 0.2% from 30.2% in the year-ago quarter. As per the company, Beyond Meat Jerky “utilizes a complex and high-cost manufacturing process.”

However, the company expects Jerky manufacturing costs to significantly moderate in the second half of the year. Lower net revenue per pound also impacted Q1’22 gross margin.

Overall, the firm’s adjusted net loss per share widened considerably to $1.58 from $0.42 in Q1’21, and was worse than analysts’ loss estimate of $1.01. Aside from gross margin contraction, the bottom-line was also hurt by higher marketing investments, increase in non-production headcount and higher freight costs.

Wall Street’s Take

In reaction to dismal Q1 results and Q2 outlook, Barclays analyst Benjamin Theurer downgraded Beyond Meat from Buy to Hold and reduced his price target significantly to $25 from $80.

The analyst cited “limited short term visibility,” rising cost pressures and high cash burn as the reasons for his rating downgrade.

“For 2H22 we see sales growth reaccelerating, but margins to remain well below historic levels,” added Theuer.

Overall, the Street is bearish on the stock with a Moderate Sell rating based on eight Holds and four Sells. At $38.18, the average Beyond Meat price target implies 45.89% upside potential from current levels.

Conclusion

In recent quarters, Beyond Meat’s performances have disappointed its investors. The company will have to deliver improved sales trends and enhanced profitability in the quarters ahead to restore investors’ faith in its business.