For most of the last year, investors essentially wrote off Beyond Meat (BYND).
The formerly high-flying plant-based pioneer has gone from a pandemic-era darling to a heavily discounted brand battling dwindling sales, poor profitability and waning excitement for meat substitutes. Shares plummeted to penny-stock status, and for months it seemed like the tale had vanished.
That narrative is changing now, at least in the near term.
Beyond Meat stock has been rallying lately, up more than 10% as traders pile into the brand after a slew of fresh announcements on product growth and distribution. The move has seen shares jump from about $0.58 to close to $1.00, a significant rally that has attracted momentum traders.
But it’s hardly a straightforward comeback tale.
Beyond Meat is attempting to reinvent itself as its primary industry under strain. New categories, new goods and new collaborations are providing the stock a fresh story, but the financial picture still raises major problems.
The scenario for investors is clear: the company is not a forgotten stock anymore. This is a high-risk turnaround tale with significant momentum behind it.
Beyond Meat expands into new categories to revive growth
The latest Beyond Meat protest is not taking place in a vacuum.
The firm has taken several steps that suggest a bigger change in strategy, one that extends beyond its typical plant-based burger business.
Its major news is its entrance into the functional beverage space. Beyond Meat is launching its drink line in a distribution deal that will put it in more than 26,000 retail locations, meaning it will be reaching a far bigger audience.
This is a concern because beverages are an entirely different sector, one that may deliver better margins and more steady demand if done effectively.
Meanwhile, Beyond Meat is beefing up its primary product range.
Spicy Buffalo Beyond Chicken goods are rolling out in over 2,000 grocery stores, and its breakfast sausage items are growing with big retailers like Kroger (KR) and Sprouts.
These are not one-off launches. The move is an attempt to rebrand Beyond Meat as a larger plant-based protein platform, rather than a single category firm.
Related: Beyond Meat CEO blames Americans for company problems
The strategy is still developing, but there is still pressure on the core business.
Beyond Meat recorded quarterly sales of roughly $61.6 million, with a gross margin of only 2.8%, a sign profitability remained elusive.
The business also announced an estimated free cash flow of around $49.8 million, underscoring continued operating issues.
With over $214.9 million in cash and a current ratio of 4.6, the firm has a long way to go before it can show sustainable development. Current ratio is a liquidity measure of a company’s ability to cover short-term obligations with its short-term assets.
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Photo by Scott Olson on Getty Images
Beyond Meat stock rally is driven by traders, not fundamentals
The recent increase in Beyond Meat’s stock price is as much a comment on the market as it is on the firm.
Shares have traded in a tight range between $1.05 and $1.15 on substantial volume, suggesting traders are interested. The $1.20 level is proving to be a key resistance area with many looking for a possible breakout.
That kind of price activity is classic momentum trading.
Beyond Meat has no earnings-based valuation; its price-to-earnings ratio is essentially useless given its present losses. But it’s driven by narrative, news flow and short-term positioning.
That dynamic breeds potential and danger.
If the narrative gets legs, the stock might continue to climb higher as traders seek momentum. But the negative might come just as fast if the story fades.
Beyond Meat faces a critical test as investors watch execution
The main difficulty for Beyond Meat is not new items but proving they can provide genuine results.
The firm has many ways to develop, whether it is drinks, breakfast or novel chicken. But each of these categories has to provide recurrent demand, hold shelf space and enhance profitability.
Elsewhere, the wider plant-based sector is still somewhat shaky.
Consumer demand has weakened in recent years, and competition is still intensifying. That makes the turnaround at Beyond Meat harder and more reliant on execution.
Key takeaways for investors
- Beyond Meat stock is rising on new product and distribution news
- The company is expanding into beverages, breakfast and chicken
- Revenue growth remains weak and margins are extremely thin
- The stock is trading as a momentum-driven turnaround play
- Execution will determine whether the rally can continue
Related: Beyond Meat tries to entice shoppers with new product
