Is the meat stock beyond repair?

Beyond meat (BYND 3.08%) the stock has seen a wild ride in its trading history. The plant-based meat maker’s stock, which reached nearly $240 per share shortly after its initial public offering (IPO) in May 2019, is now trading in the $6 per share range at the time of writing.

Moreover, the stock’s latest earnings report showed a continued downward trend as consumption declines. Given the deterioration in business conditions, does this mean a rebound is out of the question for food stocks? Let’s take a closer look.

The state beyond the flesh

Investors and consumers alike were once excited about Beyond Meat’s new offering, a plant-based meat-like product. This means that consumers could enjoy a vegan food product that provides a meat-like experience without the environmental and health effects involved in producing and consuming animal protein-based meat.

Initially, Beyond Meat enjoyed rapid growth as consumers turned to Beyond Chicken Strips. The product initially sold well, and although it was later discontinued, that product led the company to introduce beef and pork substitutes as the product line expanded.

What’s more, Beyond Meat has moved beyond the grocery store, with several restaurants offering meals made with the company’s plant-based meat. For example, TGI Fridays offers a Beyond Meat cheeseburger, and some independent restaurants serve meals with the product.

Additionally, unlike rival Impossible Foods, which remained private, Beyond Meat offered equity investors an opportunity to invest in the plant-based meat industry by going public.

After its launch at $25 per share, the stock rose rapidly. When the stock later retreated, Beyond Meat kept investors interested by increasing international sales, which began in 2020. This strategy brought its product to more than 80 countries worldwide.

Unfortunately for Beyond Meat, consumers seemed to lose interest, and over time, declining sales levels began to affect foreign markets as well. Consumers seemed increasingly upset by the meat substitute’s high prices, and some studies questioned whether its product was really a healthy alternative.

As a result, the number of retail and food service outlets offering Beyond Meat products fell to 130,000, down from 144,000 in the year-ago quarter.

Beyond meat by the numbers

While this drop may not seem like a letdown for Beyond Meat, its declining numbers had a huge impact on its financials. In the first two quarters of 2024, revenue was $169 million, down 13% from the same quarter last year.

However, the company reduced its cost of goods sold and operating expenses to a greater extent than the decline in revenue. That helped the net loss for the first half of the year narrow to $89 million from $113 million in the same period a year ago.

However, a profit is likely unattainable without revenue gains, and Beyond Meat is running out of money. Its cash position has dropped to $145 million, leading to questions about how long it can maintain its current pace.

Moreover, with $1.1 billion in senior convertible notes, it may struggle to take on additional debt. Also, with the stock price of $6 per share mentioned above, further adding to the stock count of 65 million shares outstanding would further diminish the potential upside of the stock price.

Avoid beyond meat

Ultimately, while it’s presumptuous to call Beyond Meat stock “beyond repair,” it has no obvious way out of its vicious cycle.

Plant-based meat may continue to appeal to some consumers. However, the product has been around long enough that the novelty appeal has probably worn off, even in its international markets. Because a large segment of consumers perceive it as too expensive (or possibly unhealthy), the decline in revenue could continue, putting further financial pressure on this troubled company. Given that its troubled situation makes a recovery increasingly unlikely, investors should probably sell this stock before it falls further.