Should you buy Beyond Meat stock? Mar 2023
- 5 months ago
Visit our Substack for more: https://www.overlookedalpha.com
There is no doubt that the consumer taste changes over time and plant-based meat is becoming more popular. Beyond Meat is a plant-based meat company to go public back in May 2019. Its share price has had a lot of fluctuation, reaching a high of over $230/share within 2 months of the IPO. Today, its share price is around $18/share, representing a drop of over 90% from its all-time high.
To better understand this, it is best to look at the financials.
Although it was founded back in 2009, Beyond Meat is yet to reach profitability. There are a couple of red flags that are worth discussing:
Gross margin decreases for 3rd year in a row and is now negative
This means it costs Beyond Meat more to manufacture a product than they get paid for. One of the ways to significantly improve this is to increase production volume, which would reduce the cost per product.
However, that doesn’t seem to be going well. In an environment with high inflation, the revenue in 2022 was almost 10% lower than it was in 2021.
The loss from operations in 2022 was $343 million, which is over 80% of the revenue! This is primarily caused by the high SG&A expenses of almost $240m for 2022 (increased compared to the 2021 amount of $209m).
The company has a total debt position (including leases) of almost $1.2 billion with $310 million in cash.
All of this combined, begs the question, can Beyond Meat finds its way to profitability on time, or is the company on a highway to bankruptcy?
There is no doubt that the consumer taste changes over time and plant-based meat is becoming more popular. Beyond Meat is a plant-based meat company to go public back in May 2019. Its share price has had a lot of fluctuation, reaching a high of over $230/share within 2 months of the IPO. Today, its share price is around $18/share, representing a drop of over 90% from its all-time high.
To better understand this, it is best to look at the financials.
Although it was founded back in 2009, Beyond Meat is yet to reach profitability. There are a couple of red flags that are worth discussing:
Gross margin decreases for 3rd year in a row and is now negative
This means it costs Beyond Meat more to manufacture a product than they get paid for. One of the ways to significantly improve this is to increase production volume, which would reduce the cost per product.
However, that doesn’t seem to be going well. In an environment with high inflation, the revenue in 2022 was almost 10% lower than it was in 2021.
The loss from operations in 2022 was $343 million, which is over 80% of the revenue! This is primarily caused by the high SG&A expenses of almost $240m for 2022 (increased compared to the 2021 amount of $209m).
The company has a total debt position (including leases) of almost $1.2 billion with $310 million in cash.
All of this combined, begs the question, can Beyond Meat finds its way to profitability on time, or is the company on a highway to bankruptcy?