Beyond Meat’s [BYND] share price has been in freefall since early October, losing 27.8% of its value from an all-time high of $197.30 on 12 October to a low of $142.43 on 30 October. The decline in Beyond Meat’s share price paints a worrying picture on the surface, but it’s worth zooming out to look at the bigger picture. There are still reasons to feel positive about Beyond Meat’s share price ahead of its Q3 earnings report, due on 9 November.
While the recent slump in Beyond Meat’s share price has undercut some of this value growth, the plant-based food company is still enjoying a solid year’s performance.
Beyond Meat’s share price opened the year on $76.23 so, even having closed at $156.86 on 6 November, it has still gained 107.38% throughout the year.
In fact, Beyond Meat’s share price has had an impressive Q3, growing 56.8% from $125.82 on 4 September to the all-time high on 12 October.
New offerings drive surge
Until mid-October, Beyond Meat’s share price rode a wave of optimism. Second-quarter sales of $113.34m beat already optimistic forecasts, and the company announced a string of new products and partnerships that boosted investor confidence going into Q3.
In mid-September, Beyond Meat launched its third new product of 2020, Beyond Meatballs, followed by its Beyond Breakfast Sausage on 8 October. Both of these announcements saw jumps in Beyond Meat’s share price.
Beyond Meat's Q2 sales
On 22 September, Beyond Meat announced a tripling of its distribution with Walmart stores, which continued to drive the surge in Beyond Meat’s share price through late September.
Then, on 6 October, Beyond Meat announced a new link with McDonald’s UK to provide a vegan burger, prompting Piper Sandler analyst Michael Lavery to increase his price target for Beyond Meat from $130 to $178.
However, these climbs in share price brought out the bears. Alexia Howard, analyst at Bernstein, downgraded her price target on 13 October, for example.
Various analysts pointed to Beyond Meat’s massive price-to-sales ratio as evidence that the stock was overvalued. Rebecca Scheuneman, analyst with Morningstar, takes a balanced view on Beyond Meat, noting that its strong performance in taste tests and R&D investments need to be weighed against its short-term reliance on dine-in formats that have been hit hard by the coronavirus pandemic.
As Scheuneman hints and Jon Quast wrote in The Motley Fool, Beyond Meat is a growth stock, and its value lies less in timing the short-term ups and downs of the stock market and more in the long-term viability of the company. Nothing would be a clearer signal of this than a strong set of Q3 financials, and plenty of analysts believe that’s exactly what Beyond Meat is about to serve up.
Zacks Equity Research predicts sales of $135.56m for Beyond Meat this quarter. If accurate, this would represent the best top-line performance in the company’s history — a 19.6% jump from Q2 and a massive 47.4% year-over-year increase.
Beyond Meat's estimated Q3 sales
Even the lowest estimate in Zacks’ panel sees revenue increasing, while the high estimate sees sales pushing the $150m mark. In contrast to recent quarters, Beyond Meat is also forecast to turn a profit, with earnings of $0.03 per share predicted by Zacks, beating all but one of its previous quarterly announcements — $0.06 per share, announced in Q3 2019.
With most of the reduction in profitability over that period likely to result from investment in new product lines, partnerships and marketing opportunities, this quarter could see Beyond Meat setting itself a strong platform for future growth.
What the analysts think
On the whole, the analyst community appears to agree with the view that Beyond Meat’s share price is currently overvalued. The median target among 19 analysts polled by CNN Money offering 12-month price forecasts was $136, 13.3% below the price on 6 November.
The low estimate of $55 represents a massive 64.9% decrease on the latest price, while even the most optimistic price of $178 would not see Beyond Meat’s share price regaining the level of its October high point, despite representing a 13.4% upside on 6 November’s close.
Most analysts are recommending to Hold the stock, with 10 out of 22 polled by CNN Money recommending this rating.
Though three rated the stock a Buy and one an Outperform, two gave an Underperform rating and six recommended to Sell the stock.