Fri. Jan 21st, 2022

Beyond Meat has become one of the companies with the most discounts on the US stock market as investors worry about weaker sales and skepticism grows about the plant-based meat boom.

Short positions on Beyond Meat shares have increased by 40 percent since the end of October, when the California-based company launched a income alert. A few weeks later, the group reported lower than expected third-quarter sales and reduced revenue guidance for the next quarter.

Since then, short sellers – who make money on stock price declines – have piled up in the stock. Bearish betting accounted for 42 percent of Beyond Meat’s freely traded shares as of January 10 – the highest ratio in the Russell 1000 index of the largest U.S. listed companies, according to specialist data provider S3 Partners.

US short seller Jim Chanos, which holds a clumsy position on Beyond Meat, said the plant-based meat producer has ceased to be a growth company.

While the general perception around growing in the plant-based meat market was still strong, “the problem in Beyond Meat’s case is that it is no longer the case. It’s a juxtaposition of reality versus hope, “said New York-based hedge fund founder Kynikos Associates, best known for mentioning Enron’s collapse, adding:” It was the short opportunity. ”

Bar chart of Short Interest as a percentage of free float from January 10 (%) showing Top Short Cards shares in the Russell 1000

Beyond Meat stock trades just over $ 65 a share, less than half of what it was at the center last year. Investors are worried about the company’s forecast for sales of $ 85 million to $ 110 million in the fourth quarter, a year-on-year range of a 17 percent drop to an 8 percent increase.

The weight of bets against Beyond Meat shares has meant that the shares have not responded to several “good news” announcements from the company, including US and European executive appointments from the food industry and KFC’s launch of Beyond Meat’s plant-based “chicken” nuggets in the US.

“Investors are more concerned about the margin headwinds we have seen since the last quarter. [Beyond Meat is] faced severe margin pressure and this is expected to continue for the next few quarters, ”says Arun Sundaram, analyst at CFRA.

Line chart of $ per share showing Beyond Meat shares tumbling

While its share price, according to Refinitiv, is below the consensus target of $ 72.43, the shares are still overvalued, Chanos said.

“Beyond Meat still trades at 10 times the income. This is a company that is still praised here for perfection. The market trades at 2.5 times their revenue, and successful consumer companies trade at about 4 times their revenue. ”

The balloon contests against Beyond Meat come amid increasing uncertainty about the growth in plant-based meat. Data from the US and the UK show that sales, which soared in 2020, leveled off in 2021, albeit at more difficult comparable numbers. Although U.S. retailers’ sales of plant-based meat grew 1.6 percent in December, numbers fell between March and November, declining total revenue for the year by 0.5 percent, according to U.S. retail data group SPINS.

Consumers eating more and the unavailability of some products due to supply chain problems have affected demand, according to SPINS.

Bar graph of year-on-year sales growth (%) showing US plant-based meat growth stagnating

However, enthusiastic investment alternative proteins and plant-based foods continue, and new products are introduced in fast food chains and supermarkets.

Beyond Meat shares received a brief boost last month following reports of a U.S. nationwide launch of its McPlant burger by McDonald’s, which has already been launched in the UK and parts of Europe.

Some analysts expect “Vegan”, A movement that started in the UK to eat a vegan diet after the extravagances of the December festive season, to give plant-based meat sales a boost. Michelle Coggin, consumer insight director at Kantar, expected lively UK sales. “We expect January to be a big meat-free month,” she said.

Beyond Meat did not respond to a request for comment.

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