Beyond Meat (NASDAQ: BYND) got off to a cracking start after its IPO in 2019, soaring 250% in just a couple of months. Unfortunately for early investors, that initial growth spurt soon reversed. By early 2020, the Beyond Meat share price had slumped back below its flotation level.
It wasn’t just the global pandemic that did the damage. No, Beyond Meat shares had been sliding for months before the Covid-19 virus showed up. I expect most ‘new idea’ stocks to soar, tank, and gyrate for a while. Investor sentiment does seem to be volatile when it comes to new growth stocks. And in their early days, before we have stable profits from which to judge, it’s notoriously hard to put a rational valuation on such companies.
Anyway, we’ve now had a year of reasonable buoyancy, with a couple of short-lived spikes along the way. But after the most recent peak at the end of January, the Beyond Meat share price has been in a big slump again. Since a high of $221, the shares have lost 52% of their value to stand at $104. That makes Beyond Meat look attractive to me, though we still don’t have sustainable profits yet.
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Strong long-term demand?
I do see some indications of a possible healthy long-term future. And I think the pandemic might even have helped. Despite the lockdowns and the drag they’ve put on so many businesses, Beyond Meat’s most recent figures show an 11.4% rise in revenue — to a little over $108m in the first quarter.
What might the pandemic have to do with anything? Well, I think it’s helped focus minds on various aspects of environmental threats (even if the coronavirus is totally natural). Even BP thought the depths of the slowdown created the best opportunity for launching its carbon net zero plans. I definitely think I’m seeing an upsurge of interest in so-called green investing. But why the latest slump in the Beyond Meat share price?
The growth in revenue might look good, but the quarter still ended with a net loss of $27.3m. And I see other financial pressure on the stock too. The company’s expansion, which includes investments in production facilities in the US, EU, and China, has helped build up a sizeable amount of debt, to approximately $1.1bn. It’ll take a huge amount of growth in today’s relatively modest revenue levels to make that look manageable. Oh, and some sustainable bottom-line profits too.
More Beyond Meat share price volatility?
So will I buy? Despite my dislike for debt, the Beyond Meat share price is definitely on my watchlist. I suspect we’ll see a fair bit more volatility in the coming months. And the shares might well climb again in the relatively short term. Then again, I wouldn’t be at all surprised to see future falls too, and perhaps attractive buying opportunities.
I do think there’s a potentially huge market for meat alternatives out there, especially in burger and sausage munching countries. I’ll keep watching until I get a clearer idea of how the financial picture is developing.
