Why Investors Pumped the Brakes on Beyond Meat

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Beyond Meat Inc. (NASDAQ: BYND) reported second-quarter 2019 earnings after markets closed on Monday. The plant-based meat maker posted a diluted earnings per share (EPS) loss of $0.24 on net revenues of $67.3 million. In the same period a year ago, the company reported a loss per share of $1.22 on revenues of $17.4 million. Second-quarter results also compare to consensus estimates calling for a net loss per share of $0.08 and $52.71 million in revenues.

The larger-than-expected loss per share did not outweigh the beat on revenues. Investors in fast-growing companies put a higher value on revenues than on profits. Think Amazon.

What ground up Beyond Meat stock was a simultaneous announcement that the company plans an underwritten offering of another 3.25 million shares in common stock, the bulk of which will fill the pockets of existing investors. Only 250,000 of the new shares will be offered by the company itself. The selling stockholders also have granted the underwriters a 30-day option on an additional 487,500 shares.

President and CEO Ethan Brown commented:

Looking ahead, we will continue to prioritize efforts to increase our brand awareness, expand our distribution channels, launch new innovative products, and invest in our infrastructure and internal capabilities in order to deliver against the robust demand we are seeing across our business.

The company raised its guidance for full 2019 fiscal year net revenues from more than $210 million to over $240 million, an increase of 170% compared to the 2018 fiscal year. Adjusted EBITDA guidance was raised from break-even to positive. In the second quarter, adjusted EBITDA was $6.9 million, way up from a loss of $5.59 million in the same period last year. For the year to date, adjusted EBITDA totaled $4.75 million, compared to a loss of $988 million in the first half of 2018.

Beyond Meat said it would use the net proceeds from its share of the secondary offering to continue to increase its production and supply capabilities, to pay for marketing and promotional activities, and for general working capital purposes. At Monday’s closing price of $222.13 per share, the company’s take would be around $55.5 million.

Shares traded down more than 13% in Tuesday premarket session, at $192.51 in a post-IPO range of $45.00 to $239.71. The consensus 12-month price target on the stock is $123.83.

Beyond Meat’s soaring share price is a result of its star power, which comes from being first out of the chute and the element of surprise. The company’s startling price run-up has led analysts at Barclays to forecast a global market for meat substitutes of $140 billion worldwide in the next 10 years. If Beyond Meat can turn revenues of around $250 million for 2019 into a solid share of that $140 billion market, investors who are singing the blues now will be singing a different tune. It’s now down to company management to prove they can make it happen.


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