Beyond Meat (BYND) is scheduled to report results of its first fiscal quarter after the market close on Tuesday, May 5, with a conference call scheduled for 4:30 pm ET. What to watch for:
1. OUTLOOK: During the company's last earnings call back in February, Beyond Meat said it sees fiscal year 2020 revenue between $490M-$510M, and gross margin in the range of 33%-35%. Additionally, the company said it sees 2020 adjusted EBITDA as a percentage of net revenues approximately equivalent to 2019 levels, as the company anticipates accelerated investments in marketing, R&D and international expansion initiatives in 2020.
2. CHINA ENTRY: Back in April, Starbucks (SBUX) announced that it would roll out a new plant-based lunch menu in China with Beyond Meat's products. The coffee giant's new lunch menu features pastas and lasagna using Beyond Meat's plant-based beef products, and also includes dishes from Omnipork, a plant-based pork alternative brand. Beyond Meat's plant-based minced beef will be sold at more than 3,300 Starbucks stores across China, marking the company's market entry into China.
3. FOODSERVICE PRESSURE: Last week, Wells Fargo analyst John Baumgartner downgraded Beyond Meat to Underweight from Equal Weight with a $72 price target. In a research note to investors, Baumgartner said his cautious stance is driven by expectations for much softer foodservice demand in 2020 and sharply eroding economic conditions that risk demand for premium-priced plant-based meat at retail. The analyst thinks the COVID-19 fall-out could delay the adoption curve of PBM by 12 months or more, and thinks Beyond Meat could have less flexibility for expense reduction given the importance of marketing and R&D for sustaining longer term growth.
Voicing similar concerns last month, UBS analyst Steven Strycula also downgraded Beyond Meat to Sell from Neutral with a price target of $73, down from $90. The analyst noted that the shares were up 142% off their March low and is the best performing stock in the group despite having the greatest channel risk exposure to food service. At $110 per share, the stock credits Beyond Meat for the full economic benefit of a U.S. partnership with McDonald's (MCD) and Starbucks, but does not reflect risk from reduced restaurant traffic, consumer trade-down to lower priced options or increased competition, the analyst contended. In short, Strycula believes Beyond Meat shares are not pricing in COVID-19 or recession risk.