Beyond Meat Inc. (NASDAQ: $BYND) is a pioneer in the plant-based meat industry founded in 2009 and based in Los Angeles county, California, offering various products designed to replicate the taste and texture of animal-based meat. Their product range includes burgers, sausages, ground beef alternatives, and more.
Beyond Meat primarily serves customers in the U.S. through various channels, including grocery stores, mass merchandisers, and food service providers, and has sold in over 80,000 outlets across the U.S., China, and Europe.
On Tuesday, May 14, 2024, Beyond Meat’s stock soared on short squeeze hopes.
Q1 2024 Earnings Recap
On May 8, 2024, Beyond Meat released its financial results for the first quarter ended March 30, 2024. The results painted a grim picture, with the company reporting its eighth consecutive quarter of revenue declines.
Revenue was $75.6 million, down 18.0% year-over-year, slightly above estimates of $75.24 million, while its net loss was $54.4 million, an improvement from the previous year’s $59.0 million but still above the estimated net loss of $43.06 million.
Outlook and Guidance
Despite the disappointing results, Beyond Meat reaffirmed its revenue expectations for fiscal 2024 to be between $315 million and $345 million, with expected advancements in gross margin in the latter half of the year.
However, the company acknowledged several factors that could impact sales, including macroeconomic uncertainty, weak demand for plant-based meats, high interest rates, and concerns about a recession.
Pivoting to Health and Nutrition
To revive sales and recapture margins, Beyond Meat is pivoting its marketing strategy to focus on the health and nutrition aspects of its products. Central to this campaign will be the Beyond IV burger, which was reformulated with ingredients like avocado oil, red lentils, and fava beans and has 2 grams of saturated fat and 20% less sodium than conventional ground meat.
“This product, that is now reaching full distribution later this month, has been so well received by the not only medical community, but the nutrition and registered dietitian community, that we have high confidence that it addresses the No. 1 issue in the category,” said Ethan Brown, Chief Executive Officer, during the earnings call.
Brown believes that marketing messages focused on the nutrition profile of its products will provide a point of differentiation in the market and address concerns about the health claims of its products.
Pricing Strategy Shift
To reflect the use of higher-quality ingredients and the emphasis on health benefits, Beyond Meat is shifting its pricing strategy. The newly launched products will be positioned as premium offerings with higher price tags than ever before.
Brown stated, “Our overarching goal is to restore margins to previous levels achieved in 2019 and 2020 over time.”
Analysts’ Skepticism
While Beyond Meat’s management remains optimistic about the company’s future, analysts have expressed skepticism about the new marketing and pricing strategies.
“The health and wellness marketing sounds dubious to us given that most consumers cite taste as the leading barrier to adopting the category rather than health,” TD Cowen analysts said.
Also, analysts from BTIG Managing Director and restaurant analyst Peter Saleh noted that the company burned $33 million in cash during the quarter and expects Beyond Meat to need to raise additional capital this year, which could be significantly dilutive for existing shareholders.
Over the past year, Beyond Meat has implemented several cost-cutting measures and financial restructuring efforts to improve its bottom line and position itself for growth. These include job cuts, pulling back on the launch of new products, and “right-sizing” its production footprint.
In February, the company said it would implement “a steep reduction in our operating costs,” increase prices for some products, and “right-size” its production footprint.
Meme Stock Resurgence
Amid the challenging financial results and strategic shifts, Beyond Meat’s stock experienced a surge on Tuesday, May 9, 2024, fueled by hopes of a short squeeze. The stock was up 20.1% as of Tuesday morning and 17.5% since the start of the year.
This movement coincided with a broader rally in meme stocks, initiated by the return of Roaring Kitty, the trader who initiated the meme stock rally of 2021 with his coverage of GameStop stock.
With 25,356,827 BYND shares shorted, representing approximately 40.97% of the company’s float, Beyond Meat became a prime target for meme stock traders seeking to initiate a short squeeze.
Stock Performance
After initially surging over 20% early trading hours today amid hopes of a meme stock-fueled short squeeze, the stock gave back those gains as of the market close on May 14.
Beyond Meat’s stock was trading at $8.01, slightly up 0.63% for the day. Year-to-date, the stock remains up over 10% despite the disappointing Q1 results and ongoing challenges facing the plant-based meat pioneer.
With a market cap of around $519 million, investor sentiment remains fragile as Beyond Meat executes its turnaround strategy.
Should You Buy Beyond Meat Shares in 2024?
The recent meme stock-fueled surge in Beyond Meat’s shares is a double-edged sword for investors. On one hand, it provides a potential opportunity for short-term gains if the momentum continues.
However, the company’s fundamentals remain challenging, with declining sales, persistent losses, and eroding margins. While management’s new health-focused strategy and premium pricing model offer some hope, analysts are skeptical about their effectiveness.
Additionally, the need to raise additional capital could dilute existing shareholders. For long-term investors, it may be prudent to wait and see if Beyond Meat can successfully execute its turnaround plan before considering an investment. Speculative traders, however, may find the meme stock frenzy too tempting to resist.
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