Fake-meat maker Beyond Meat Inc. faces weakening demand and more competition — including from real meat — with more losses likely up ahead, an analyst said in making the case for downgrading the stock.
Kristina Ruggeri, analyst at Argus Research, downgraded Beyond Meat
BYND,
to sell from hold. Shares on Friday tumbled 8.9% to 14.71.
She said in a research note on Friday that “demand for plant-based protein has fallen amid weaker economic conditions, and many customers are trading down to cheaper proteins — including meat.”
“The company has also been hurt by increased competition from other makers of plant-based protein, as well as by ‘low utilization’ charges and termination fees from co-manufacturers,” she continued.
Ruggeri downgraded Beyond Meat a month after the company reported a large decrease in third-quarter sales and steeper losses. The company at that time forecast full-year sales that were below Wall Street’s expectations. The quarter, Ruggeri said, was hurt by higher costs, lower pricing and costs related to canceled comanufacturing agreements. Beyond Meat has laid off nearly a quarter of its staff, she said.
“We expect the company to post continued losses in the coming quarters, and are widening our loss estimates for both 2022 and 2023,” Ruggeri said.
Argus increased its 2022 per-share lost estimate to $5.84, from $5.14. The firm also widened its loss estimates for next year, to $3.77 a share from $3.45.
Beyond Meat over the past few years has tried to expand by stocking its plant-based burgers and sausages next to the real thing, and by securing spots on the menus of big fast-foot chains. But that expansion, Ruggeri said, was too much.
“The rapid growth was more than the company could handle internally, and forced it to sign third-party co-manufacturing deals that dramatically increased the cost of goods sold,” she said. “However, as demand for BYND products has softened, the company has incurred ‘low utilization’ charges at some manufacturers.”
Beyond Meat and its stock have faced a difficult year, as inflation drives up ingredient costs and rivals roll out their own plant-based proteins. The company suspended its chief operating officer after he was arrested and accused of biting a man’s nose during an altercation in Arkansas.
Of the 13 analyst ratings tracked by FactSet, four are sell ratings, while eight are hold ratings. The stock has one “overweight” rating.
Beyond Meat stock is down 77% so far this year. By comparison, the S&P 500 index
SPX,
has fallen 17% over that time.