Things could get interesting for plant-based meat substitute firm Beyond Meat (NASDAQ:BYND) following its recent post-earnings action. The stock skyrocketed immediately following the release of its latest quarterly results, only to fall back to Earth in the sessions that followed, thanks in part to news that the firm expects to raise more capital at some point this year.
Undoubtedly, post-earnings euphoria (shares initially surged over 70% in after-hours trading) turned to disappointment at the drop of a hat. And though some fans of the product may view the battered alternative meat play as a deep-value comeback play, investors should be aware of the full extent of the risks with the name, as off-the-charts levels of volatility are likely to persist throughout the year.
All things considered, I am neutral on the stock, as the risks seem just as high as the potential rewards. If things go right for Beyond Meat, more double-digit single-day surges could easily be in the cards. Perhaps the latest and greatest iteration of its line-up could help it come roaring back.
In the meantime, if the plant-based meat substitute’s latest innovation isn’t in for another sizzle, shareholders could face some serious dilution as one capital raise could potentially lead to another. And dip-buyers who nibbled on the way down could find out in a hurry that it is still possible to lose money with a stock that’s shed a vast majority of its value.
As a fan of the product, I am watching the company closely as it looks to navigate through these trying times. While I hope the company can make it out of the rut, hope alone is not enough to warrant punching a ticket into the stock.
A Value Play Without Much Room for Error
The million-dollar question remains: is BYND stock a great value play, or is it more of a trap that could stand to wallop bottom fishers in the name? It’s pretty hard to tell at this point, in my humble opinion. Though it could go either way, there are some encouraging developments that may be enough to fuel a bull case for those enough to brave the choppy waters in Beyond Meat stock.
Indeed, if Beyond Meat proves to be undervalued, it could be massively undervalued. At the same time, it’s unclear how much shareholders stand to be diluted should one capital raise lead to another.
Sure, the stock has shed more than 96% of its value from its 2019 peak levels. But that doesn’t mean you can’t lose money by betting on it while it’s trading at around $8, especially if you’re easily rattled by wild market swings.
That said, if you’ve got a strong stomach, believe in the product, and have faith in management, I think BYND stock stands out as one of the most intriguing high-risk bets out there as it looks to invest deliberately in what the firm hopes could turn the tides.
For now, the alternative meat market looks really tough to predict, with new entrants and numerous headwinds (alternative meat is no longer novel, GLP-1 drugs could curtail appetites for food firms as a whole) that could continue to act against Beyond Meat.
Indeed, it’s hard to believe that the firm has a market cap of a mere $527 million. It’s been a massive fall from grace. And though the company stated that it has enough cash to make it through the next year, I think a capital raise is unavoidable at this juncture. After all, 12 months doesn’t seem like a long enough time frame to pull off an epic turnaround.
Beyond IV Could Be the Key to Winning Back Consumers
The alternative meat pioneer is incredibly innovative. Once it solves its potential liquidity issues, I think the firm could have what it takes to make changes in its product to better resonate with consumers at the (alternative) meat aisle. Though the firm has had limited success with its Beyond Sausage product, I don’t think we can rule out the potential for future enhancements as the firm looks to improve its taste, texture, and nutritional content. Additionally, its Beyond Steak push looks nothing short of intriguing.
All it takes is one delicious product to win back consumers’ hearts. Though it’s tough to tell which efforts will pay off most, I think it’s too soon to count out the firm’s Beyond IV platform (the fourth generation of its burgers and beef) as it hits American grocery shelves this year.
Personally, I think the protein factor could be what wins back demand from younger consumers. With more protein (21 grams of plant-based protein per serving) and less sodium, it will be interesting to see how the platform moves the needle on the stock. For now, though, the Wall Street community doesn’t seem all too optimistic about the firm’s year ahead.
Is BYND Stock a Buy, According to Analysts?
On TipRanks, BYND stock comes in as a Moderate Sell. Out of nine analyst ratings, there are four Holds and five Sell recommendations. The average BYND stock price target is $6.86, implying downside potential of 13.7%.
The Bottom Line
Beyond Meat may be on the ropes again now that a big chunk of its post-earnings gains have been wiped out. That said, the company has a meaningful growth driver in the Beyond IV platform that could help the firm turn things around.
I have no idea if the latest generation of meatless meats will win back consumers. For now, it’s more of a “show-me” story. If it can show us what it’s truly capable of, though, the stock’s comeback could have the potential to be explosive.
Personally, I’m sitting on the sidelines until the firm’s cash position improves meaningfully, perhaps on the back of its latest line of meatless meats.
