This stock is down for good reasons.
If a stock price gets low enough, it can be tempting to consider buying some shares. Beyond Meat (BYND -3.91%) certainly qualifies as a discounted stock right now. Shares of the plant-based meat specialist are down over 50% in the past year and are 95% below their pandemic-era highs.
The business had a market capitalization of $12 billion back in 2021 but is now valued at below $500 million. That’s quite a fall for one of the biggest brands in this popular food niche.
Don’t let that discount tempt you into buying Beyond Meat shares in hopes of seeing a quick rebound, though. Let’s look at some good reasons to stay away from this cheap stock for the time being.
Not in the driver’s seat
Beyond Meat can’t control its own destiny today. Instead, the business is being pushed around by wider industry forces. New product introductions weren’t enough to rejuvenate growth last quarter, for example. Sales declined 23% in its retail segment, which caters to supermarket chains, and slumped 26% in the restaurant division.
It’s true that Beyond Meat is seeing much stronger demand in its international business. But overall sales were still down 8% last quarter and slumped by 18% for the full 2023 year. The company might return to modest growth in 2024, but only if the U.S. industry niche rebounds. Until then, investors should brace for volatile — and often negative — growth results from Beyond Meat.
Gross profit slump
Beyond Meat lost money on both a gross and net basis last year. The good news is management slashed costs and cut inventory, which helped protect profits. However, the main problem is that shoppers aren’t willing to pay much of a premium at all for plant-based meat products like its Beyond Burgers. Sales volumes declined in 2023 even though the company cut prices on most of its offerings.
Admittedly, industry peers are seeing similar pressures. PepsiCo (NASDAQ: PEP) warned investors back in early February that growth rates are slowing down in the consumer packaged foods space. But Pepsi is expecting to continue expanding in 2024 after boosting organic sales by 10% in 2023. It’s also on track to widen its profit margin for a second straight year. Beyond Meat is projected to lose money again in 2024 as sales decline for a third consecutive year.
Too risky
Management is working on a restructuring plan, with details to come later in 2024. This plan should include some dramatic cuts to the production footprint, head count, and the company’s global growth ambitions.
Beyond Meat might also limit the scope of its product introductions to focus on just the most profitable and popular items. Whatever management decides, it is likely that Beyond Meat will have much smaller growth ambitions going forward.
It’s too early to bet on that rebound potential given how little investors know about management’s plans. For now, the company remains on a path toward lower sales and continuing losses absent a sharp rebound in the U.S. plant-based protein niche.
Beyond Meat’s brand is still a leader in this category despite a flood of competition that’s entered the space since the pandemic. But the last few years have demonstrated that this brand power isn’t enough on its own to support a sustainably profitable business. Until investors see strong evidence to the contrary, they should avoid this consumer staples stock.
