Beyond Meat Reported More Great Numbers. Wall Street Isn't Thrilled. -- Barrons.com
11:07 am ET August 5, 2020 (Dow Jones) Print
By Al Root
The alternative-protein pioneer Beyond Meat reported another blowout quarter, with sales 14.5% higher than analysts expected, yet sales were down by 6.4% in morning trading.
The move underscores two points: Wall Street is an expectations game in the short run, and investors have come expect big numbers from the startup.
Sales through U.S. grocery and retail outlets exploded, up 195% year over year. The pandemic pushed people out of restaurants and back into their houses.
"[Retail] shipments also outpaced Nielsen's plus-102% with the gap attributable to new distribution in the club channel," wrote Wells Fargo analyst John Baumgertner in a Wednesday research report. Analysts often look to the data provider Nielsen to gauge intra-quarter sales trends, but Nielsen doesn't capture all sales. Beyond has expanded its product distribution rapidly -- especially at large club-format stores.
U.S. household penetration of Beyond products is at 4.9% -- versus 3.5% in January and 2% a year ago, according to Baumgartner. That's another positive. Still, he has concerns over whether retail sales can keep growing at such a rapid clip and rates shares the equivalent of Sell. His price target for the stock is $72 -- a figure he left unchanged following the earnings report.
Bernstein analyst Alexia Howard raised her price target to $136 from $133. Howard, however, still rates share the equivalent of Hold.
Howard understands, to some extent, the shares' weakness following earnings. Sales growth was strong, but the growth rate decelerated compared with the first quarter and the company didn't offer new financial forecasts for 2020. The pandemic is making it harder for Beyond to forecast, as it is for many other firms.
Credit Suisse analyst Robert Moscow noted the strong sales growth but called the quality of results weaker than expected, even after backing out $7.4 million in higher costs due to Covid-19. He wanted to see higher profit margins.
U.S. restaurant sales were down 59%. "Management attributed the sharpness of the decline to the company's high exposure to small, independent restaurant chains that have been disproportionally impacted by the pandemic," wrote Moscow in a Wednesday research report. "In addition, Nielsen tracking data indicates that U.S. Retail sales growth has slowed to 60-70% over the past six weeks from a rate of 170%" during the second quarter.
He rates shares Hold and has a $142 price target for the stock.
Overall, three analysts covering Beyond rate the shares Buy, 10 rate it at Hold, and nine rate the shares at Sell. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 55%. The average Sell-rating ratio is only about 7%.
Valuation appears to be the biggest hurdle for the Street. Shares trade for about 241 times estimated 2021 earnings, although the company is growing rapidly and is just becoming profitable.
The average analyst price target is roughly $109 a share, more than 20% below recent levels.
Analysts' caution hasn't helped investors so far in 2020. The stock was up 88% year to date as of Tuesday's closing price, far better than comparable returns of the S&P 500 or Dow over the same span.
(END) Dow Jones Newswires
