Beyond Meat Stock Is Not Beyond Hope

Key Points

• Beyond Meat is beyond hope, the transition is taking hold. 
• Q4 results are better than expected and profitability is still on tap for 2023. 
• Short interest is high and a squeeze could be brewing. 

If you’ve wondered about Beyond Meat (NASDAQ: BYND), this company is not beyond hope. The rollout of plant-based meat products by McDonald’s and Yum! Brands NASDAQ: YUM were flops but there is still demand for products and profitability remains within reach. Last year’s failures were a wake-up call for the market and the company, resulting in a strategy shift. While McDonald’s NYSE: MCD remains a partner and has McPlant Burgers and Nuggets on menus outside the US Beyond Meat has been focusing on retail and food service channels to develop a sustainable growth model.

The biggest takeaway from the Q4 results is that positive cash flow is still expected in the second half of 2023 and that has the short-sellers at least buying back their shares. 

The short interest in Beyond Meat is a whopping 37% going into the Q4 release, and the figure is more astounding when you count in the dark pool activity. Fintal.io has the dark pool short interest at 75% which suggests more than 100% of this company is short on the market. The stock price could skyrocket in this scenario, as seen in the pre-market action.

Shares are up more than 10% on the news, and this stock is set up for a reversal. The key resistance point ranges from $20.25 to $21.50, and it may fall in the coming weeks. 

The analysts have kept this stock at Hold albeit a weak Hold despite the downturn in share price. The post-release activity is sparse so far; Marketbeat.com has picked up a single commentary which is from Mizuho and includes a price target increase. This is the first activity since the last earnings release and is noteworthy because the price target nearly doubled from $11 to $20.

This is above the current price action and the Marketbeat.com consensus which implies about 5% of upside. Assuming this trend continues, the bottom for Beyond Meat is in, and the rally may be about to begin. 

Beyond Meat Q4 Results Beyond Expectations 

Beyond Meat had a decent quarter despite the lapping of last year’s test runs with McDonald’s and KFC. The company brought in $79.94 million in revenue, down 20.6% YOY but 550 basis points better than expected. The decline is driven by a 16% decline in pounds sold and a 4% decline in price per pound.

Weakness was roughly equal in the US and International segments, but segment results differed in each region. Retail sales fell less in the US than in food service sales, but the opposite is true in the International segment. 

One takeaway from the results is that the top and bottom lines are impacted by strategic cost reductions that are helping to reduce inventory. This is bad news for Q4 but good news for 2023 and offset by better-than-expected performance on both the top and bottom lines.

Regarding earnings, the company's adjusted loss came in at $1.05 which is $0.22 better than last year and $0.15 ahead of the consensus and sequential improvement is expected throughout 2023. 

“We are making solid progress in our transition to a sustainable growth model, one that emphasizes the achievement of cash flow positive operations within the second half of 2023 … Our fourth quarter results clearly demonstrate delivery against our strategy and plan, including solid sequential progress on margin recovery and operating expense reduction, and continued inventory drawdown.” said Beyond Meat President and CEO Ethan Brown.

The Technical Outlook: BYND Is Ready To Reverse

Beyond Meat’s shares are ready to reverse, but they may not confirm this move soon. The resistance at $20.25 to $21.50 is potentially substantial, and the company still needs to prove it can succeed on its transition. At best, this stock has hit bottom and will consolidate within the new range until more proof is available. Until then, the short sellers and bottom fishers will drive volatility.