Shares of Beyond Meat(NASDAQ: BYND) stock fell 12% in June according to data provided by S&P Global Market Intelligence. It was a continuation of negative investor sentiment as the company continues to report sales declines and losses.
People aren't buying
Beyond Meat was supposed to be the next big thing. It seemed to be riding a vegan trend when it went public in a hugely hyped initial public offering (IPO), but it seems like the hype wasn't justified. What were strong revenue increases, in hindsight, look like interest in something new. But it didn't stick. Revenue keeps sliding and was down 18% year over year in the 2024 first quarter. Gross profits were back in the positive after going negative for a while, but gross margin was a meager 4.9% in the quarter.
People are still buying Beyond Meat products, and it had $76 million in revenue in the quarter. But net loss was only a drop better than last year's $59 million at $54 million. That means its losses are almost as much as its revenue, and a business can't sustain itself with these profit and margin levels.
Management continues to try new things to generate interest and become more efficient. It brought production in-house to be more cost efficient, but the transfer required some outlays that are eating into profits in the short term. It's raising prices, but while that has positively impacted gross margin and may lead to higher revenue, it could also turn off some consumers.
It cut expenses by more than $14 million in the quarter and reduced cash consumption by almost $17 million, and it's rebalancing inventory to rebuild from a better place.
Should investors take the risk?
Is Beyond meat a bargain hiding in plain sight or a value trap? There's no way to know for sure, but it looks extremely risky right now. It has only $174 million in cash but more than $1 billion in debt, and with only $327 million in trailing-12-month sales, it's in a risky financial position.
There's always the chance that it can rebound, but the chances don't look so good. There are other turnaround stocks that look like they have better prospects if an investor is interested in a high-risk rebound opportunity, but most investors should stick with winning stocks. If Beyond Meat does begin to demonstrate progress, you can always buy in later.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool has a disclosure policy.
