As Beyond Meat's stock heads for its best day ever, analysts still feel cautious

By Emily Bary

Bernstein is taking forecast for dramatic gross-margin improvement 'with a grain of salt' in light of this year's performance

Beyond Meat Inc.'s stock could be headed for its best day on record Wednesday, but Wall Street analysts continued to take measured views on the shares.

Among the positives from Beyond Meat's (BYND) latest report were that the company expects that gross margins could reach as much as a high-teens percentage this year, while revenue for the most recent quarter exceeded the consensus view.

But as the stock surged nearly 60% in premarket trading Wednesday - which would be good for its largest one-day percentage gain on record if those gains carry through to the close - analysts expressed that the picture remained mixed.

Bernstein's Alexia Howard noted that Beyond Meat would have posted an "unimpressive" negative-8.0% gross margin for the fiscal fourth quarter when excluding a non-cash charge. Though the company is looking for mid- to high-teens gross margins in 2024, with better improvement in the second half of the year, Howard said the target isn't a slam dunk.

"[W]e take this with a grain of salt, as entering 2023 management guided to a gross margin in the low double-digit range, but finished the year at -1.4% excluding this quarter's non-cash charge," she wrote.

Howard flagged that Beyond Meat's products are resonating better in Europe, where consumers are more climate-focused than they are in the U.S.

"The bull case here is that the combination of a step-change improvement in taste and texture from the Beyond 4 innovation, combined with more persuasive (scientifically supported) health-focused marketing messages will be enough to win lapsed U.S. consumers back into the fold in 2024," she wrote.

But bears, she said, wonder whether the new Beyond 4 products with different ingredients will matter to U.S. consumers "who may have previously had disappointing taste/texture experiences with earlier versions of Beyond Meat."

Howard has a market-perform rating and $9 target price on the stock.

Jon Andersen of William Blair noted that Beyond Meat's gross-margin outlook reflects anticipated price increases and restructuring efforts, moves he says are "necessary and have fundamentally changed the story for the time being."

However, "the approach also limits the company's ability to invest in demand-driving activities perhaps including efforts to change the narrative around the benefits of plant-based meat," according to Andersen.

In his view, Beyond Meat's "journey to sustained and self-funded growth is likely to be measured in quarters as opposed to months with the destination still uncertain."

He rates the stock at market perform.

TD Cowen's Robert Moskow said that Beyond Meat's "shift to raising prices instead of cutting makes sense because Beyond probably needs to target a smaller set of consumers to succeed."

At the same time, though, he worried that "ongoing pressure in the plant-based meat category" makes the company's sales target of $315 million to $345 million for the year seem "overly optimistic." His estimate calls for $315 million.

Moskow has an underperform rating on the stock, and he cut his price target to $10 from $15 in Wednesday's note to clients,

Of the 15 analysts tracked by FactSet who cover Beyond Meat's stock, seven have hold-equivalent ratings and eight have sell-equivalent ratings, with an average target price of $6.80.

-Emily Bary

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02-28-24 0829ET

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