3 Reasons to Avoid Beyond Meat Like the Plague

If the price of a stock is low enough, it can be tempting to consider buying some shares.Beyond Meat (NASDAQ: BYND)It's no doubt a discounted stock now. Shares of the plant-meat specialist are down 501 TP3T over the past year, which is 951 TP3T below its pandemic high.

The company had a market capitalization of $12 billion in 2021, but is now valued at less than $500 million. That's a pretty big drop for one of the biggest brands in the popular food segment.

However, don't be tempted to buy Beyond Meat stock in hopes of seeing a quick rebound. Let's look at some good reasons to stay away from this cheap stock for now.

No dominance

Today, Beyond Meat has no control over its destiny. Instead, the company is being pushed by broader industry forces. For example, new product introductions weren't enough to revitalize last quarter's growth. The noodle and曏 chain's retail sales fell 231 TP3T, and its food and beverage business declined 261 TP3T.

Admittedly, Beyond Meat's international business has seen a surge in demand. But total aggregate sales were still down 8% in the last quarter and 18% for the full year 2023, and the company could return to modest growth in 2024, but only if the U.S. industry niche bounces back. Until then, investors should prepare for Beyond Meat's erratic - and often negative - growth.

Gross profit declines

Beyond Meat lost money last year in both gross and net profit. The good news is that management has cut costs and reduced inventory, which has helped protect margins. The main problem, however, is that shoppers simply aren't willing to pay a premium for plant-based meat products like Beyond Burgers. 2023 saw a decline in sales, even though the company cut prices on most of its products.

Admittedly, the industry is facing similar pressure.PepsiCo (NASDAQ resonance code: PEP)Back in early February, investors were warned that the growth rate in the consumer packaged foods segment was slowing. But PepsiCo boosted organic sales by 10% in 2023 and expects continued expansion in 2024. Its margins are also expected to expand for the second consecutive year. Beyond Meat is expected to lose money again in 2024 as sales decline for the third consecutive year.

The risk is too great.

Management is working on a restructuring plan, the details of which will be announced later in 2024. The plan should include significant reductions in production capacity, headcount and the company's global growth ambitions.

Beyond Meat may also limit the scope of its product offerings, focusing only on the most profitable and popular products. Whatever management decides, Beyond Meat's future growth ambitions are likely to be much smaller.

It is too early for investors to bet on the rebound potential as they know little about management's plans. For now, without a significant rebound in the U.S. plant protein segment, the company will continue to struggle with declining sales and continued losses.

Despite the influx of competitors since the pandemic, the Beyond Meat brand remains a leader in the field. But the past few years have shown that this brand influence alone is not enough to sustain profitability. Investors should avoid this consumer stock until they see strong evidence to the contrary.

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Demitri Kalogeropoulos does not own any of the stocks mentioned above.The Motley Fool holds a recommendation for Beyond Meat.The Motley Fool has a disclosure policy.

3 Reasons to Avoid Beyond Meat Stock Like the Plague was originally published by The Motley Fool.