After the crushing investor sentiment of COVID-19 in March, only a few stocks have recovered their past glory. The counterfeit meat maker, Beyond Meat (NASDAQ 🙂 is one of them.
The stock has climbed 162% from its March lows, closing yesterday at $ 122.66, a level it reached in mid-February, just as the coronavirus-induced sell-off began.
The current rise in the share price is the result of a variety of positive developments showing that the El Segundo, California-based company is rapidly gaining market share at a time when consumers are increasingly purchasing plant-based products that look and taste meat.
Investors sent Beyond Meat shares up 26% on Wednesday, after the company said on Tuesday in its Q1 2020 earnings report that Wall Street had expectations. The first quarter beat surprised many analysts as it suggested that demand remains robust despite the corona virus outbreak that is closed restaurants in the United States
The company's first quarter sales of $ 97 million surpassed the analyst average estimate of $ 88.2 million. However, the growth rate of 141% from a year earlier is the slowest pace in two years for Beyond Meat, as the economic stall negated the faux meat manufacturer's restaurant sales.
The company reported a net result of $ 1.8 million, or $ 0.03 per share, compared to a net loss of $ 6.6 million, or $ 0.95 per share, a year ago. Adjusted earnings before interest, taxes, depreciation, and amortization were $ 12.7 million. A year ago, the company posted an adjusted EBITDA loss of $ 2.1 million.
"I am proud of our first quarter financial results, which exceeded our expectations despite an increasingly challenging operating environment due to the health crisis of COVID-19," said CEO Ethan Brown in a statement.
Roller-Coaster Ride
Despite the current strong rebound, Beyond Meat shares have been riding a roller coaster since the company went public in May last year. IPO price of $ 25 per share.
After reaching a record high of $ 239.7 in July, BYND was trading below $ 80 in late 2019, as it became clear to investors that competition was growing with many more companies offering plant-based meat products.
Indeed, after seeing the success of Beyond Meat, some of the major players quickly entered the vegetable food market. Swiss multinational food conglomerate Nestlé (OTC 🙂 launched its vegetable Awesome Burger in the United States in September. Supermarket chain Kroger Company (NYSE 🙂 is the latest company to join the launch of vegetable patties under the Simple Truth brand.
Nor is it clear whether consumers are still willing to pay a hefty premium for Beyond Meat products over meat when the economy goes into a deep recession and the nation's unemployment rate skyrockets, two things that seriously affect household purchasing power harm.
But some investors remained convinced that it will be difficult for competitors to break Beyond Meat's lead in the vegetable protein market so quickly.
"In the short term, I actually think Beyond Meat is much better than anything else in its space," Mark Newton, president of Newton Advisors, told CNBC in an interview. "The stock has shown very good signs of acceleration lately."
Amid widespread restaurant lockdowns and closings, Beyond Meat is benefiting from increased sales in its retail channel due to inventory building. Other factors driving growth include new product launches, international expansion and deals such as a partnership with Starbucks (NASDAQ 🙂 in Canada and China.
Bottom Line
Despite Beyond Meat's impressive rally in the past six weeks, the stock remains very volatile, making it unsuitable for risk-averse investors. That said, the company will remain a dominant player in the vegetable protein market, which could represent 13% of total supermarket-related meat sales over the next decade, according to Goldman Sachs.
