Beyond Meat (NASDAQ:BYND)is still searching for the proverbial “beef” following its Q4 report last week.
This plant-based meatalternative company saw its stock price cooking on high heat during the firstfew months following its IPO debut in May 2019. However, the stock steadilydeclined in 2H19 as the hype wore off and fears of increasing competition tookhold. It's understandable why the stock is lower if you dig a bit deeper:
BYND reported a pennyEPS miss despite revenue jumping 213% yr/yr to $98.5 mln, well above the $81.5mln consensus. This tells us that margins were lower than expected. More to thepoint, revenue growth was driven by higher volume sales across retail,restaurant, and foodservice channels. But that’s not a signal about scalablemargins, which is ultimately what the market wants to see here.
BYND also benefittedfrom increased sales to international customers, a higher number of points ofdistribution, including new customers, and higher sales velocities at existingcustomers. For 2020, revenue guidance of $490-510 mln was in-line with analystexpectations.
While the penny EPSmiss was disappointing, we think the main reason the stock is down so much isthe guidance. While 2020 revenue guidance was in-line, BYND also said itexpects adjusted EBITDA margin to be flat with 2019's 8.5% result. Typically,as revenue rises (and this guidance computes to a healthy 64-71% increase),investors expect margins to also rise as the company benefits from economies ofscale. To see flat margins is disappointing.
Beyond Meat Inc(NASDAQ:BYND) bills itself as a food company that provides plant-based meats.
It offers its productsin the meat platforms of beef, pork, and poultry. The company sells itsproducts to various customers in the retail and foodservice channels throughbrokers and distributors in the United States and internationally.
The company representsa high-growth speculative play with a relatively small float. That has beenenough to stoke risky bets and leverage on the basis that it could come tocontrol a theme very much in gear with the ESG investment thesis that hasdriven alt-energy names, TSLA, and other gen-Z bets that seem to befrontrunning future fund flows from social-impact funds still gatheringfinancial ammunition.
But BYND hardly hasexclusive rights to the non-animal meat theme at this point, and a ton of competitionlooms. Because the branding process hasn’t assumed dominance, we continue tosee this as a bear bet until convinced otherwise.
Our BYND Earnings Summary:
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BeyondMeat misses by $0.01, beats on revs; guides FY20 revs in-line (106.14 -6.37)
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ReportsQ4 (Dec) loss of $0.01 per share, $0.01 worse than the S&P Capital IQConsensus of ($0.00); revenues rose 212.5% year/year to $98.5 mln vs the $81.52mln S&P Capital IQ Consensus.
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AdjustedEBITDA, which is a non-GAAP financial measure, was $9.5 mln compared to anAdjusted EBITDA loss of $3.8 mln in the year-ago period.
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Coissues in-line guidance for FY20, sees FY20 revs of $490-510 mln vs. $498.93mln S&P Capital IQ Consensus.
Our BYND Conference Call,Analyst, and Research Notes:
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BYNDexplains the flat margins by saying it expects accelerated investments inmarketing, R&D, and international expansion in 2020.
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Analystsare currently forecasting 2020 as being the first year that BYND reports aprofit on a full year basis. But the higher spending level seen in Q4 data putsthat thesis in jeopardy.
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BYND'stop-line growth has been remarkable including in Q4. That tells us that thecompetitive concerns may be overdone for now.
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Itlooks like BYND has decided to invest more in its business in 2020. Thatprobably makes sense in the long run but that will likely pressure margins overthe next few quarters and potentially push off profitability until 2021, whichmay have consequences for investment flows.
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Thismay result in additional EPS misses in 2020.
