BY DOMINIQUE JACQUET

Since the recording of the educational film dedicated to Beyond Meat, the stock price has dropped from $ 132 to $ 105 in 2 weeks …

Two main announcements during this short period:

1- The financial results of the first quarter 2021 (May 6)

2- A strengthened partnership with Walmart (May 12)

The first quarter results show an improvement in the Cost of Sales (COS) and Selling, General & Administrative expenses (SG & A), as well as an intensification of R & D expenditures and industrial investment (CAPEX).

In total, an improvement in the cost structure (R & D is an investment) and the preparation (R & D, investment) of future growth.

The deterioration of the simplified free cash flow presented in the film (EBITDA – CAPEX) is stopped, but the figure still represents -30% of sales (EBITDA = -10% / CAPEX = 20%).

Immediate growth is modest because the firm announces $ 108M of sales, certainly up from Q1 2020 ($ 97m) but still in withdrawal from the highest of Q2 2020 ($ 113m). Before the announcement, the stock price dropped from $ 132 to $ 119. Following the announcement, it will continue his descent and reach a lower at $ 103.5 on May 10.

The strengthened partnership with Walmart is an excellent news in terms of potential sales growth but the market reaction to the announcement will be insignificant.

It seems important to me to deep dive in the details of sales. Certainly, the global, growth is disappointing, but it is necessary to distinguish “retail” and “foodservice”. The “distribution” part increases by 45%, the “catering services” activity went down by 34%, obvious impact of the pandemic. We can therefore consider a future of strong growth at the exit of COVID.

With a market capitalization greater than $ 6bn, the company is still worth more than 15 years of turnover, which remains appreciable for a firm that has not reached breakeven in profit, nor in cash flow.

This valuation is likely to justify itself in the ability of the firm to realize its potential for sales, but competitive analysis (see film) shows that the actors of this game are, at least for some of them, powerful and determined. The market is very promising but the winner (s) is (are) difficult to identify upstream. Hence the financial logic of Bill Gates (see film, again …): I invest everywhere, may the best win! In finance, this is called the portfolio theory.