Should I buy Beyond Meat shares today?

Beyond Meat shares have well and truly tanked. Is this a buying opportunity? Edward Sheldon takes a look.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in plant-based burger company Beyond Meat (NASDAQ: BYND) have performed poorly over the last year. 12 months ago, the stock was trading near $120. Today, however, it’s at $33.

So, what’s going on here? And has the share price weakness presented an attractive buying opportunity for me?

Why has Beyond Meat stock tanked?

The main reason Beyond Meat shares have fallen recently is that the company’s growth has stalled, and profitability has declined.

This is illustrated by its recent second-quarter results. For the period, net revenue was $147m. This was below the figure of $149.4m generated a year earlier and also below the consensus forecast of $149.2m. Loss from operations came in at $97.1m versus $19.7m a year earlier.

Looking ahead, the company lowered its 2022 revenue forecast to between $470m and $520m (versus $465m last year). Previously, it had projected full-year revenue of $560m to $620m.

As for why the company’s growth has stalled, it comes down to lower demand for its products due to consumers’ budgets. Right now, many consumers are struggling due to high energy costs. As a result, they are trading down to cheaper products. Beyond Meat’s burgers are quite expensive, so it is feeling the impact of this shift.

Is this a buying opportunity?

Are Beyond Meat shares worth buying for my portfolio at $33 a pop? I’m not convinced they are.

Sure, the company’s valuation is a lot more reasonable after the recent share price fall. At present, Beyond Meat has a market cap of just $2.1bn. If the company can generate sales of $500m this year, the forward-looking price-to-sales ratio is only around four.

Yet I think there’s still risk to the downside.

One thing that concerns me here is that demand for plant-based meat appears to be fizzling out. According to data from NielsenIQ, total sales of meat alternatives in the US rose just 0.3% year on year for the 52 weeks to 28 May. Meanwhile, McDonald’s, which has trialled a ‘McPlant’ burger in the US (made with Beyond Meat patties), recently said that it won’t be rolling out these burgers nationally this year due to the fact that sales have not met projections.

Another issue is the rising level of competition in the plant-based meat space. With more competitors now on the scene, Beyond Meat doesn’t really have the capacity to increase its prices. This means it could be hurt by inflation. It’s worth noting that analysts expect the group to post a net loss of $332m this year, nearly double the net loss of $182m posted last year.

A third issue for me is the fact that the stock has a very high level of short interest. At present, about 24.4m Beyond Meat shares are on loan (roughly 40% of the free float). This tells me that hedge funds and other sophisticated investors expect the stock to fall.

Given the uncertainty here, I won’t be buying Beyond Meat shares for my portfolio. To my mind, there are much better growth stocks I could buy today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »