Beyond Meat stock rallies, soaring over cost-cutting plans

Shares of Beyond Meat (BYND) are flying high Wednesday morning following the company's fourth-quarter earnings call, where it outlined plans to reduce expenses and turn profitable. The plant-based meat producer aims to cut costs significantly in 2024 through pricing actions, new product launches, and expense discipline — seemingly boosting investor confidence in the stock.

Yahoo Finance's executive editor Brian Sozzi breaks down the details of Co-founder and CEO Ethan Brown's comments made in the earnings call.

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Editor's note: This article was written by Angel Smith

Video Transcript

BRAD SMITH: Beyond Meat shares skyrocketing, after cost cutting measures and promises of less discounting, dominated the company's latest earnings call. The plant-based meat leader and meat maker also teases potential actions coming to reduce debt and shore up its cash position.

"Yahoo Finance's" executive editor, Brian Sozzi, joins us with a serving of analysis here. I held back from what I was going to say.

SEANA SMITH: A big of analysis. I like it.

BRIAN SOZZI: Don't hold back. Just let it fly. We're talking plant-based meat here. But really, I should say, some of the gains have been given back since last night. Beyond shares were up close to 100%, as soon as earnings hit the wires. So we're seeing a little bit of a sell off, should I say in the pre-market.

But, again, an eye popping gain. Top ticker on the "Yahoo Finance" platform. So let me decode, I think, what investors are seeing with this ticker today. One, massive short covering rally here at Beyond. You go to the Beyond Meat ticker page on "Yahoo Finance," click on stats, scroll down. You'll see that massive short position that looks like it's getting unwound.

Question you have to ask yourself, why is this getting unwound? A couple of reasons. The company has cut a lot of expenses. In this year, notably the second half of this year, you may not see a lot of losses from Beyond Meat. They might actually start making money, again, which is a really good thing, if you're a public company or any company in general.

Next, they did tease price hikes coming on new Beyond Meat burgers. Now, I talked to Ethan Brown just a couple of days ago about that product. It's a product he's very jazzed up about. I think that's going to start shipping in April, potentially, at higher prices.

The Street really likes that, because Beyond has been discounting its products, has hammered margins the past year and a half. And then also, lastly, and this is something I dug a little more into. And to be perfectly honest, I need to dig more into it.

They're eyeing a potential balance sheet boost in 2024. Now, the company said-- on the company's balance sheet, they have about $1.1 billion in convertible notes. They took out that debt, guys, in 2021 when the stock was absolutely near its peak, things were hot.

That note comes due in 2027. And there's some concern on the Street about liquidity for Beyond Meat. They exited last year with about $190 million in cash. How are they going to meet that debt obligation?

It is unclear what they're going to do regarding raising or boosting their balance sheet. That's the mood on the Street here this morning. But the mood, it seems to be they might raise cash and buy back that debt. Unclear, but it's something to watch.

It could be a major catalyst or a stock driving catalyst for Beyond Meat. But I mentioned before, some of the cost cutting that Beyond Meat has done. And I think this is a very important quote here by co-founder and CEO Ethan Brown on the earnings call last night, really, I think highlighting to investors how deep this company has gone.

They have used to deal with 13 co-packers or companies, or manufacturing sites that made their products for them. They're now down to one. Now, that is likely to lead to a massive improvement in profit margins, but, also, improve the product quality on a product that is just fundamentally made different than meat.

So a lot to be taken in here from this company. The Street-- three underperform ratings reiterated on the Street. So you have a lot of nonbelievers still on Beyond Meat, justifiably so. And the stock is really down, I think, 95% using this stock price right now here in the pre-market compared to those highs from 2019. I think it was $239 a share.

But still, I think just a massive short covering rally, because there were signs incremental signs of positive things finally happening at this company. Now, they just have to deliver to the Street.

SEANA SMITH: Yeah, certainly. Forecasts of better margins. Their revenue beat the realignment that we've seen within their product portfolio. Certainly giving investors a reason to buy today.

BRIAN SOZZI: I like the meatballs, Seana. I like the food.

SEANA SMITH: They're good. They are good.

BRIAN SOZZI: It works.

SEANA SMITH: I know. I'm one of those believers in Beyond Meat. But we'll see whether or not the share price holds up.