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Beyond Meat (BYND) Falls After Q2 Earnings: Stock Not as Meaty as Investors Thought?

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Beyond Meat BYND reported its second quarter earnings results after on Monday, July 29. In spite of an earnings beat, BYND stock took a 12% dive Tuesday and has continued to fall to a total of -21.8%. Despite the recent downturn, Beyond Meat has skyrocketed from its $66 opening price in March to its current price of $173.98, a 160.7% increase.

Let’s see how BYND performed in the second quarter and what this breakout, plant-based meat company’s future may have in store.

Q2 Overview

BYND reported second quarter earnings of $0.01 per share, a 112.5% surprise over our Consensus Estimate of an $0.08 loss per share. For revenues, the company blew away estimates of $52.5 million to report $67.3 million. This marked 287% revenue growth from a year earlier.

The company reported many other very encouraging statistics that should give investors confidence going forward. Gross profit came in at 33.8% up from last quarter, a promising number for such a young company, especially one growing as fast as BYND.

At the time of BYND’s IPO, the plant-based meat manufacturer had access to roughly 30,000 points of sale worldwide. Beyond Meat now boasts 53,000 points of sale, which marks a 77% gain in just three months. The company made deals with Tim Hortons QSR and Dunkin Brands DNKN to test Beyond’s breakfast sausage patty in their locations. The company also announced new manufacturing lines in Q2 to keep up with its rapidly increasing global demand.

You may be wondering why the stock dropped so steeply after the earnings call with this much positive news. The reason for the drop likely stems from BYND’s announcement of a secondary stock sale by original stockholders. These original stockholders will sell a combined 3 million shares of common stock, while the company will sell an additional 250,000 shares of common stock.

Q3 Outlook

Beyond’s third quarter looks like it may play out similarly to Q2, with the company still in its rapid growth phase. This means it continues to invest heavily on expansion, including production capacity, product development, and other growth expenses.

Q3 revenues are projected to come in roughly same as Q2 at $66.8 million. But let’s not forget how easily Beyond Meat crushed our Q2 revenue estimate. Meanwhile, earnings for Q3 are expected to come in at a loss of $0.01 a share.

The company just went public on May 2nd, so fiscal 2019 data is somewhat meaningless as it does not constitute a whole year. However, projections for fiscal 2020 are positive, showing positive $0.04 earnings, which would be a large improvement over this year’s expected loss of $0.22. The 2020 projection has also been raised by 233.33% in the past 60 days, up from -$0.03, to help paint a more promising growth picture. Revenue for this year is also supposed to grow immensely over 2018, with projected 171.5% growth to $238.8 million.

Unfortunately, Beyond Meat does not give guidance at this point. Therefore, we do not have much insight into where company executives believe BYND is heading.

Bottom Line

Beyond Meat is one of the hottest growth stocks on the market right now and Q2 revenue growth seems to reaffirm what most investors believe for the future of this innovative company.

However, as a young stock with huge growth potential, investors are not yet completely sure how to value it, leading to significant volatility similar to Uber UBER and Lyft LYFT before their IPOs. Beyond Meat stock has the potential to dominate the plant based-meat market due to its first mover opportunities, and BYND seems to predict that most investors think the company will do just that.

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