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Beyond Meat Stock Falls Due to Lower Q4 Earnings

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Beyond Meat (NASDAQ:BYND) stock fell over 10% in the after-market trading hours on Thursday. The company’s lower-than-expected fourth-quarter earnings dragged the stock down. However, the company’s growth investments more than offset the significant rise in its revenue. Beyond Meat stock has fallen 19.8% as of 10:27 AM ET today.

The company’s EPS was -$0.01 in the fourth quarter of 2019, which was better than -$1.10 in the fourth quarter of 2018. However, analysts expected an EPS of $0.01. Beyond Meat narrowed its losses on a YoY (year-over-year) basis due to its improved gross margin. The company’s gross margin expanded to 34% in the fourth quarter of 2019 compared to 25% in the fourth quarter of 2018.

However, higher marketing spending, innovation efforts, higher stock-based compensation, restructuring expenses, and increased administrative expenses put pressure on Beyond Meat’s earnings.

The company’s adjusted EBITDA was $9.51 million in the fourth quarter of 2019 compared to an adjusted EBITDA loss of $3.76 million in the fourth quarter of 2018.

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Beyond Meat’s strong revenue growth

The company’s net revenue rose 212% YoY to $98.5 million in the fourth quarter of 2019. Analysts expected revenue of $79.5 million. The top line benefited from higher volumes of fresh platform products sold in retail as well as the restaurant and foodservice channels.

Notably, the gross revenue from the fresh platform rose about 238% to $102.1 million. However, the gross revenue from the frozen platform decreased 17% YoY to $3.6 million. The company discontinued its frozen chicken products in the first quarter of 2019.

Looking at channel-wise growth, the retail channel’s revenue rose about 199% to $40.6 million. Meanwhile, the restaurant and foodservice channel’s revenue rose 223% to $57.8 million in the fourth quarter. Overall, Beyond Meat’s revenue grew about 239% to $297.9 million in 2019.

Beyond Meat sees a huge growth opportunity in the restaurant and foodservice channel. During the fourth-quarter conference call, CEO Ethan Brown mentioned that the company has a presence in less than 4% of the 650,000 outlets in the US. Beyond Meat has been collaborating with big names like Subway, Yum Brands’ KFC, and McDonald’s (NYSE:MCD).

Recently, Starbucks (NASDAQ:SBUX) announced that it will offer Beyond Meat’s plant-based sandwich across its locations in Canada starting on March 3. Impossible Foods collaborated with Disney to offer its plant-based meat at Disney’s theme parks and cruise line.

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2020 outlook

Beyond Meat expects its 2020 revenue to grow 64%–71% to $490 million–$510 million. The company expects its 2020 gross margin to be 33%–35% compared to 33.5% in 2019. Beyond Meat expects its adjusted EBITDA margin to remain unchanged in 2020 compared to last year. The company will continue to make significant growth investments.

Beyond Meat will also continue to invest in international expansion. Excluding Canada, the company’s international sales accounted for 26% of the fourth-quarter revenue compared to 17% in the fourth quarter of 2018.

Investors are concerned about the growing competition for Beyond Meat in the faux-meat market. Aside from Impossible Foods, the company faces Tyson Foods, Kellogg, Nestle, Hormel Foods, Kroger, and Cargill.

To capture growth in the alternative meat space, Beyond Meat will also focus on expanding the distribution of its products across all major channels. The company has been testing its products at certain major restaurants and wants to extend its collaborations. In January, the company announced that McDonald’s continues to test the plant-based burger called the “P.L.T. burger” (Plant, Lettuce, and Tomato), which is made with a Beyond Meat patty. In contrast, Tim Hortons stopped testing Beyond Meat products at its Canadian locations.

Lately, Beyond Meat stock has been volatile. As of Thursday, the stock has risen 40.4% YTD (year-to-date). Meanwhile, the S&P 500 and the Dow Jones have fallen 7.8% and 9.7% YTD, respectively. The coronavirus outbreak has impacted the US and global financial markets as well.

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