Meme buzz wears off on Beyond Meat after earning reality

[Beyond Meat headquarters in El Segundo, California, USA.]
JHVEPhoto

Beyond Meat (NASDAQ:BYND [https://seekingalpha.com/symbol/BYND]) is on watch in the meme stock world after the plant-based meat company issued preliminary Q3 results late last week. The company forecast revenue of around $70 million for Q3, which was slightly above analyst expectations and in line with prior guidance. The expected revenue tally represents an estimated 13% year-over-year decline, highlighting continued weak demand for its plant-based products.

Beyond Meat (NASDAQ:BYND [https://seekingalpha.com/symbol/BYND]) also guided for a gross margin rate of 10% to 11% for the quarter, which includes a $1.7 million expense from suspending most operations in China. Operating expenses were forecast to land in a range between $41 million and $43 million, with roughly $2 million consisting of non-routine charges such as legal expenses, retention plan costs, and lease terminations.

BTIG analyst Peter Saleh noted that persistently weaker gross margin and elevated operating expenses combined again to hold back profitability for Beyond Meat (BYND [https://seekingalpha.com/symbol/BYND]). "We remain on the sidelines as we continue to see no recovery in sales trends, no progress towards sustainable financials with cash burn likely worse than last year, and tough financing arrangements as evidenced by the highly dilutive convertible refinancing recently completed," he updated.

Saleh and his team view Beyond Meat (BYND [https://seekingalpha.com/symbol/BYND]) shares with a balanced outlook, as strong brand awareness and consumer adoption of plant-based proteins are offset by declining sales, category weakness in the U.S., deteriorating financials, and likely capital needs. "While the company has established several key restaurant partnerships recently, these efforts have generated few permanent menu items, and we believe a rebound in sales growth could take longer than expected given restaurants' hesitancy to offer plant-based meat on a wide scale or consistent basis," warned Saleh. The weaker sales growth outlook, heightened competition, existing cash burn, and uncertainty on additional capital raises lead BTIG to tag Beyond Meat (BYND [https://seekingalpha.com/symbol/BYND]) with a Neutral rating.

Shares of Beyond Meat (BYND [https://seekingalpha.com/symbol/BYND]) were down 4.8% in premarket trading after shedding 23.1% on Friday.

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