Beyond Meat Inc's BYND.O quarterly losses ballooned, as the plant-based protein maker spent heavily on product launches and offered big discounts as it tried to guard its market share against deep-pocketed players and nimble upstarts.
The company's stock slid 20% as Beyond Meat reported a gross margin of 0.2% for the first quarter ended 2 April, a 30 percentage point slide from a year earlier.
The company blamed higher manufacturing and shipping costs as well as its move to launch a plant-based jerky with PepsiCo IncPEP.O for poor quarterly performance.
"To launch a first-time product at such a large scale and prior to the establishment of our own dedicated and streamlined process, we had to do so in an expensive and inefficient manner," chief financial officer Philip Hardin said on an earnings call.
The company is also battling competition from Tyson Foods Inc TSN.N and Kellogg Co K.N, which are spending heavily to cater to the craze for plant-based meat, forcing Beyond Meat to offer deep discounts on its products.
"Investors are going to be increasingly questioning BYND's path to profitability, which isn't good for the shares in a rising interest rate environment," CFRA Research analyst Arun Sundaram wrote in a client note.
Beyond Meat reported a per-share loss of $1.58 in the first quarter, compared with 43 cents a year earlier and much wider than the market expectation of $1.01.
Sundaram also said Beyond Meat has burnt nearly $580 million over the past year, raising the likelihood of a capital raise by the end of 2022.
Omicron-induced decline in sales to restaurants weighed on Beyond Meat's revenue, which barely rose to $109.5 million in the latest quarter, missing Wall Street's expectations of $112.3 million, according to IBES data from Refinitiv.
Shares of the company have shed nearly 60% this year.
Beyond Meat Set To Slip Below IPO Price As Surging Costs Raise Cash Doubts
The above news was followed by news that shares of Beyond Meat BYND.O slumped 28% and were on track to open below their initial public offering price for the first time on Thursday 12 May as investors fretted over the vegan meat maker's rising costs to battle increased competition.
Cash used for operations in the first quarter surged to $165 million from approximately $31 million a year ago, as the plant-based meat pioneer diversified its product range and offered steeper discounts to protect its market share.
"Beyond Meat's cost structure may be out of whack, and cash may run out by the end of next year," JP Morgan's Ken Goldman said.
"We worry that management's outlook is a bit out of balance with current realities."
On Wednesday 11 May, chief executive officer Ethan Brown sought to address the concerns.
"I wouldn't take this quarter's cash consumption and then just kind of play it out and assume that we're out of cash based on that," he said, adding the company was taking "several measures" to reduce expenses.
Beyond Meat's shares were trading at $18.80 before the bell on Thursday 12 May, much lower than its 2019 IPO price of $25. Its market value has plummeted to $1.66 billion from a peak of approximately $14 billion.
At least five brokerages cut their price targets on the stock on Thursday 12 May, with some raising concerns over the company's path to profitability, especially as they anticipate cost pressures to remain due to surging inflation.
"Plant-based meat is not a fad, Beyond Meat's mission is noble, ... however, we remain of the view a profit inflection may be several quarters out, if not years," Cowen analysts said.
Beyond Meat Reverses Course After Slipping Below IPO Price In Choppy Trading
All of the above news was followed by news that shares of Beyond Meat BYND.O reversed course to gain as much as 12% in volatile trading after opening below their initial public offering price for the first time on Thursday 12 May following the vegan meat maker's bigger quarterly loss.
Shares tumbled as much as 22% to a record low of $20.50 and below the 2019 IPO price of $25. Trading in the stock was halted multiple times in the first hour.
At 10:58 am ET on Thursday 12 May, Beyond Meat was up 7%, mirroring the broader market that flipped course to trade higher.
Beyond Meat has seen its fortunes plummet in recent quarters as it battled increasing competition and surging inflation that has led Wall Street to fret over the possibility of the company needing more cash.
"They've got over $700 million in cash so they're not going bankrupt. The stock is down 87% from its high and I think people are saying at this level maybe I give it a shot," Thomas Hayes chairman Great Hill Capital in New York said.
"It's got enough margin of safety."
In the first quarter, cash used for operations surged to $165 million from approximately $31 million a year ago, as the plant-based meat pioneer diversified its product range.
"Beyond Meat's cost structure may be out of whack, and cash may run out by the end of next year," J.P. Morgan's Ken Goldman said.
"We worry that management's outlook is a bit out of balance with current realities."
On Wednesday 11 May, chief executive officer Ethan Brown sought to address the concerns.
"I wouldn't take this quarter's cash consumption and then just kind of play it out and assume that we're out of cash based on that," he said, adding the company was taking "several measures" to reduce expenses.
So far this year, the stock is down approximately 60%.
Approximately 42.1% of Beyond Meat's free float were in short position as of 9 May, according to Ortex data, just off of an all-time high of 42.8% from last week.
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