Falling Plant-Based Sales And Rising Expenses Will Undermine Future Prospects

Key Takeaways

• Weak consumer demand and intensifying product skepticism threaten revenue, while ongoing competition and regulatory risks undermine category growth and brand positioning.
  
• Escalating input costs, persistent losses, and high debt deepen viability concerns, raising bankruptcy and dilution risk amid shrinking margins and limited recovery prospects.
  
• Streamlining operations, product innovation, expanded distribution, competitive pricing, and alignment with health and sustainability trends position Beyond Meat for revenue growth and improved profitability.

Catalysts

A plant-based meat company, engages in the development, manufacture, marketing, and sale of plant-based meat products under the Beyond brand name in the United States and internationally.

• Demand for plant-based meat substitutes is showing clear evidence of prolonged category weakness, with net revenues declining nearly 20 percent year over year and the CEO explicitly stating a need for a fundamental reset, indicating that any assumptions for stable or growing sales are at risk. Sustained lack of consumer interest, particularly amid growing skepticism about processed foods, threatens core revenue and impairs any growth prospects.
  
• Rising cost pressures due to increased competition for agricultural inputs and global supply chain disruptions, exacerbated by climate change, are likely to drive up raw ingredient expenses and further squeeze already thin gross margins, as fixed cost absorption worsens with lower volumes and price discounting intensifies to compete with cheaper animal protein.
  
• The company continues to confront regulatory and reputational headwinds as processed food scrutiny increases, with both existing and potential regulations around health and nutrition claims creating significant brand risk. This could result in lost shelf space, reduced product acceptance, and slower velocity at retail, undermining revenue growth and possibly necessitating costly marketing and reformulation outlays that dilute operating earnings.
  
• Intensified competition from not only incumbent food giants but also new entrants in protein innovation (such as cell-cultured and fermentation-based alternatives) is outpacing the company's ability to revive consumer excitement, potentially accelerating market share loss and leaving Beyond Meat with high R&D and SG&A burdens that further depress net margins and raise questions about long-term viability.
  
• Chronic struggles to achieve positive EBITDA and reduce persistent cash burn-demonstrated by continued negative adjusted EBITDA margins around 35 percent and mounting net losses-heighten bankruptcy and dilution risk given over $1.2 billion in debt and a major debt maturity in 2027. Failure to stem these losses in a shrinking or stagnating category presents material downside to equity value as future earnings power may decline rather than recover.

Beyond Meat Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Beyond Meat compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Beyond Meat's revenue will decrease by 0.2% annually over the next 3 years.
• The bearish analysts are not forecasting that Beyond Meat will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beyond Meat's profit margin will increase from -51.0% to the average US Food industry of 6.3% in 3 years.
• If Beyond Meat's profit margin were to converge on the industry average, you could expect earnings to reach $19.1 million (and earnings per share of $0.2) by about August 2028, up from $-153.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 13.6x on those 2028 earnings, up from -1.3x today. This future PE is lower than the current PE for the US Food industry at 20.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.83%, as per the Simply Wall St company report.

Beyond Meat Future Earnings Per Share Growth

Risks

• Beyond Meat's appointment of an interim Chief Transformation Officer and aggressive operational efficiency measures-including significant cost reductions and targeted gross margin expansion-could substantially improve operating margins and move the company toward EBITDA positive operations, ultimately supporting stronger net earnings.
  
• The company's focus on product innovation, such as Beyond Ground with minimal ingredients and high protein content, and repositioning the brand away from strict animal protein replication to address broader consumer needs, may attract new customers and drive revenue growth over time.
  
• Expanding and rebuilding distribution channels, specifically through consolidated brand blocks in key U.S. retailers and the addition of new retail partners, is likely to stabilize and eventually increase topline revenue by improving product accessibility and boosting sales velocity in high-impact locations.
  
• As cost structure and scale improve, management anticipates the ability to price products on par with or below animal protein equivalents, making Beyond Meat more competitive on value and potentially accelerating both revenue growth and gross margin improvement.
  
• Long-term secular consumer trends toward high-protein, low-saturated fat, and sustainable foods-as well as regulatory momentum favoring health and sustainability-could reinforce steady demand for Beyond Meat's offerings and improve brand perception, leading to sustained increases in revenue and profitability.

Valuation

• The assumed bearish price target for Beyond Meat is $2.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Beyond Meat's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $2.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $303.4 million, earnings will come to $19.1 million, and it would be trading on a PE ratio of 13.6x, assuming you use a discount rate of 11.8%.
• Given the current share price of $2.58, the bearish analyst price target of $2.0 is 29.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.