Shares of Beyond Meat (BYND) are under pressure after the company reported worse than expected quarterly results amid a slowdown in the pace of sales growth caused by the pandemic. Despite the news, Piper Sandler analyst Michael Lavery upgraded the stock to Overweight, while his peer at UBS raised Beyond Meat's rating to Neutral.
RESULTS: On Monday after market close, Beyond Meat reported third quarter adjusted losses per share of (28c) and revenue of $94.4M, both below consensus expectations of 5c and $132.81M, respectively. The company's President and CEO Ethan Brown said Beyond Meat "experienced the full brunt and unpredictability of COVID-19 on our net revenues and accordingly, throughout our P&L."
The company also reported third quarter adjusted gross profit of $27.3M, or adjusted gross margin of 28.9% of net revenues, reflecting exclusion of expenses attributable to COVID-19. The company said, "Due to the COVID-19 pandemic, the company continues to experience a meaningful slowdown in its foodservice business as stay-at-home advisories and restrictions on foodservice locations' operating capacity have resulted in closures or significantly curtailed operations of many of its foodservice customers. At the same time, the surge in demand from retail customers that characterized the early stages of the pandemic as consumers shifted towards more at-home consumption has moderated as panic-buying generally has subsided. […] the company's 2020 outlook, previously provided on February 27, 2020, remains suspended until further notice."
SHARES LOOK 'ATTRACTIVE': Piper Sandler analyst Michael Lavery upgraded Beyond Meat to Overweight from Neutral with a price target of $144, down from $178. The stock is under pressure following third quarter results, which makes the shares attractive as McDonald's (MCD) is working with the company as it rolls out plant-based patties, Lavery told investors. The analyst sees "opportunity" as a long-awaited McDonald's launch is set to start, and "encouraging vaccine news" may help food service broadly. Lavery also pointed out that Piper's survey suggests plant-based foods appeal to younger consumers.
Meanwhile, UBS analyst Erika Jackson also upgraded Beyond Meat to Neutral from Sell with a price target of $107, down from $110. The analyst reduced fiscal 2021 EBITDA estimates by 20% to reflect the company's third quarter miss and continued foodservice pressure. However, around $116 per share, the lower estimates, COVID-19 challenges and price headwinds are now reflected in the stock price, Jackson contended. The analyst now sees Beyond Meat's risk/reward as more balanced.
'SHOCKINGLY WEAK' QUARTER: Keeping a Neutral rating on the shares, Credit Suisse analyst Robert Moskow lowered the firm's price target on Beyond Meat to $120 from $142. The analyst said that Beyond reported a "shockingly weak" third quarter, with sales up only 3% compared to his estimate of 54%. While Moskow acknowledged that some may look at the pullback in the shares as an opportunity to build a position in an early-stage growth story that directly benefits from a post-COVID world, he sees several reasons to remain cautious, including heavy exposure to the most impaired channels of trade within foodservice, uncertainty regarding Beyond's level of participation in McDonald's new "McPlant" burger, and decelerating growth trends in U.S. retail consumption.
MCDONALD'S NEW PLANT-BASE BURGER: Beyond Meat was already under pressure on Monday ahead of quarterly earnings due to some confusion surrounding McDonald's "McPlant" plans. While initially the assumption was that McDonald's was creating a new line of plant-base burgers of its own, Beyond Meat later told The Fly that both companies had "co-created the plant-based patty, which will be available as part of their McPlant platform." McDonald's has said it has several partners it is working with, including Beyond Meat, on its plans to introduce plant-based alternative proteins to its menu.
BEYOND PAN PIZZAS: Pizza Hut (YUM), in partnership with Beyond Meat, said that it is bringing "a plant-based meat pizza to the masses" with the nationwide launch of new Beyond Pan Pizzas, the Beyond Italian Sausage Pizza and the Great Beyond Pizza. The Beyond Italian Sausage Pizza and Great Beyond Pizza are available for a limited time while supplies last at all traditional Pizza Hut locations nationwide for contactless delivery, carryout and curbside pickup and at select participating Pizza Hut Express locations. Customers in the UK will also be able to enjoy Beyond Meat pizzas at select Pizza Hut locations throughout London as part of a limited-time offering.
PRICE ACTION: In morning trading, shares of Beyond Meat have plunged over 20% to $119.71.
Beyond Meat
-30.83 (-20.48%)
McDonald's
-0.91 (-0.43%)
Yum! Brands
+0.72 (+0.71%)