30 Oct

Is Beyond Meat Stock Losing Its Muscles after 3Q Earnings?

WRITTEN BY Mike Sonnenberg

Beyond Meat (BYND) released its third-quarter earnings on Monday during after-market hours. The company generated revenues of $92 million during the quarter, which beat analysts’ estimate of $82.2 million. Beyond Meat reported a quarterly profit for the first time. The revenues from the fresh platform segment grew more than 265%, while the revenues from the frozen platform segment rose 74%. The EPS of 6 cents also beat analysts’ forecasts of 3 cents. However, none of the numbers supported Beyond Meat stock.

On Tuesday, the stock opened more than 20% lower and ended the day 1 cent below $82, which translates to a 22.2% decline in a single day. First, management’s comments about discounting signaled to the markets that Beyond Meat has been impacted by the competition. Second, the company’s lockup period for early investors and stockholders expired yesterday. The sell-off was also caused by stockholders rushing to monetize the stock for the first time. While the average trading volume for Beyond Meat stock has been around 4.3 million, the lockup expiration drove it up to 32.1 million shares. At 10:02 AM ET today, Beyond Meat stock rose 4.64%.

Rising competition is hurting Beyond Meat stock

Apart from the discounts, rising competition in the plant-based meat space is also hurting Beyond Meat. While the shelf space for Beyond Meat products at retailers isn’t shrinking, that for the competitors is on the rise.

Beyond Meat is a front-runner in the fast-growing fake meat industry. However, the industry is still small. The competition is rising in the segment. Last week, Yum! Brands’ (YUM) Pizza Hut tested a fake sausage pizza topping made by Kellogg’s (K) Incogmeato division. Having a vegan protein option on the menu will give Pizza Hut an edge over other quick-service restaurants like Domino’s and Papa John’s. Kellogg’s Incogmeato also started selling ready-to-cook fake meat.

Impossible Foods is Beyond Meat’s closest rival in the segment. Last week, Impossible Foods sought approval from EU authorities to sell its products in Europe. Burger King launched the Impossible Whopper nationally in partnership with Impossible Foods. Beyond Meat wants to start production in Europe next year.

Tyson Foods (TSN), the largest meatpacker in the US in terms of the market share, has launched a plant-based product line—Raised and Rooted. The company had a 6.5% share in Beyond Meat, which it sold days before the company’s highly successful IPO. On the debut day, Beyond Meat stock rose 163%. Tyson could end up being a formidable challenger for Beyond Meat due to its extensive supply chain.

Big partnerships

The fastest way to expand for Beyond Meat is to tap into partnerships with established food giants. Last week, Dunkin’ Brands (DNKN) announced that it would be rolling out the Beyond Sausage sandwich in 9,000 of its stores. The sandwich will go national on November 6. In July, the company rolled out the sandwich in its Manhattan stores for testing.

McDonald’s (MCD), Subway, and Yum Brands owned KFC are also testing Beyond Meat products. McDonald’s is testing a cobranded PLT (plant, lettuce, tomato) sandwich in 28 locations in Canada. During the conference call, Beyond Meat CEO Ethan Brown was referring to McDonald’s when he said, “They think about that sandwich like they do the Big Mac in the sense it’s an overall architecture, and they wanted to name that the PLT. But it’s extremely clear that it’s with Beyond Meat and that Beyond Meat is the brand.”

Subway is also testing the Beyond Meat Mariana Sub at 685 locations. However, the company’s partnership with Tim Hortons hasn’t materialized as expected. Tim Hortons took Beyond Meat products off the menu in all of the provinces except Ontario and British Columbia last month.

While Beyond Meat is eyeing big partnerships, the competition isn’t far behind. Burger King launched the Impossible Whopper nationally in partnership with Impossible Foods.

Is Beyond Meat stock losing the curiosity factor?

Today, a Wall Street analyst said that Beyond Meat’s “curiosity factor” might be fading.

While talking to CNBC, Morningstar’s R.J. Hottovy said that the curiosity regarding whether fake meat products really taste like meat might be fading. He also said that the test with McDonald’s in Canada might not be as successful as the company’s management would like to believe.

Uber might follow Beyond Meat stock

Apart from earnings, Beyond Meat stock also fell due to the expiration of the lockup period. Uber’s (UBER) lockup period is expiring on November 6. Uber stock has already fallen 28% since its IPO in May. The expiration of the lockup period might dampen the stock price. Jim Cramer, CNBC’s Mad Money host, thinks that Uber’s lockup expiration “could hobble the entire market.” Uber is releasing its third-quarter earnings on November 4.

Latest articles

In the third quarter, David Tepper's Appaloosa included three new stocks, exited five securities, and increased its stake in the existing eight stocks.

Yesterday, Deutsche Bank (DB) bumped up its target price for Tesla (TSLA) by 12% after the company revealed the Tesla pickup truck on November 21.

Home Depot (HD) stock fell by more than 5% in the pre-market session today. The company reported mixed third-quarter results.

TikTok has no doubt become a big headache for Facebook (FB). Last month, CEO Mark Zuckerberg framed TikTok as a threat to free speech.

Innovation will be the competitive advantage for Tesla Solar. Tesla launched a solar roof tile last month that's more efficient and is easier to install.

AMD rose 3.42% on Monday after an analyst raised the target price on the stock—the second target price revision on AMD stock in less than a week.