Is Beyond Meat a buy or sell in December?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Nov 24, 2020
  • Beyond Meat is still a very risky and the current risk/reward ratio is not good for the long term investors
  • The price of the stock has weakened after worse-than-expected results in Q3
  • If the price falls once again below $120 it would be a strong “sell” signal and a sign of the trend reversal

Beyond Meat (NASDAQ: BYND) shares have weakened from $175 below $110 in less than three weeks and the current price stands around $142. Beyond Meat has found strong support above $120 but this stock probably doesn’t have much upside potential according to analysts.

Fundamental analysis: Beyond Meat continues to experience a meaningful slowdown in its foodservice business

Beyond Meat is a Los Angeles-based producer of plant-based meat substitutes with products designed to emulate chicken, beef, and pork sausage. Beyond Meat made a stronger push in Asia and the company launched plant-based minced pork in China.

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In the beginning, products will be available at five popular restaurants in Shanghai and the company also announced that will bring two new burger products to the market in the upcoming months.

The price of the stock has weakened after worse-than-expected results in Q3, revenues rose 2.7% to $94.4M but gross profit fell to 28.9% sales vs. 35.6% a year ago. The main reason for this was a lower net price realization as a result of higher trade discounts.

Beyond Meat continues to experience a meaningful slowdown in its foodservice business due to the Covid-19 and restrictions on foodservice locations. “Our financial results reflect a quarter where for the first time since the pandemic began, we experienced the full brunt and unpredictability of COVID-19 on our net revenues and accordingly, throughout our P&L”, said CEO Ethan Brown.

There are some obvious risks when it comes to buying Beyond Meat shares and my opinion is that the price could collapse. The average Wall Street price target for Beyond Meat stands around $125 and with $8.8B market capitalization, this stock is expensive.

Growth rates are slowing down constantly over the last few quarters and it is important to mention that the competition is intensifying. If we focus on the last quarterly results and future growth rates the current price of the stock doesn’t reflect the reality of the underlying business.

This is still a very risky stock and the current risk/reward ratio is not good for the long term investors, in the upcoming period, we can expect lower stock prices.

Technical analysis: The risk/reward ratio is not good

Beyond Meat shares have weakened from the recent highs pressured by worse-than-expected results in Q3.

Data source: tradingview.com

The important support levels are $120 and $100, $160 and $180 represent the resistance levels. The risk/reward ratio is not good currently but if the price jumps above $160 it would be a signal to buy Beyond Meat shares and we have the open way to $180.

On the other side, if the price falls once again below $120 it would be a strong “sell” signal and maybe a sign of the trend reversal.

Summary

Total revenues have increased by 2.7% YoY in Q3 but this is below expectations for a growth company. Beyond Meat continues to experience a meaningful slowdown in its foodservice business and this stock probably doesn’t have much upside potential according to analysts. Growth rates are slowing down constantly over the last few quarters and the current risk/reward ratio is not good for the long term investors.

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