The independent equity analysis firm New Constructs has recently added Beyond Meat to its list of “zombie stocks.”
The research company, which analyzes corporate filings and models economic earnings using machine learning and natural language processing, cautions that there is a significant chance that the share price of Beyond Meat Inc. (NASDAQ:BYND) has a high risk of declining to $0 a share.
In a note published on Tuesday, David Trainer, CEO of New Constructs, warned that Beyond Meat “must dramatically cut costs and lower its cash burn, or it will go bankrupt.” Companies with high cash burn rates and little capital reserves are dangerous in any market, but today more than ever.
In comparison to falls of 13.2% and 6.4%, respectively, for the S&P 500 Index (SPX), Beyond Meat shares have dropped 47.8% in 2022 and 72.2% over the past year.
Where can you enjoy McDonald’s vegetarian McPlant burger? It’s difficult for analysts to follow the Beyond Meat option on American menus.
Trainer claimed that Beyond Meat has lost $1 billion in free cash flow since 2018 and that the company had not been able to produce any positive free cash flow since going public in 2019.
Trainer claims that Beyond Meat’s $635 million free cash flow burn over the previous 12-month period that ended in the first quarter of 2022 shows no signs of slowing down. He states, “with just $548 million in cash and cash equivalents on the balance sheet at the end of 1Q22, Beyond Meat’s cash balance could only sustain its cash burn for just ten months after 1Q22. Raising additional capital to fund further cash burn would likely come at a high cost and be bad news for existing and new shareholders.”
In light of this, New Constructs added Beyond Meat to its list of “zombie stocks,” which also includes Peloton Interactive Inc. PTON, 10.22%, Freshpet Inc. (FRPT), and Carvana Co. (CVNA).
Trainer continued, “Beyond Meat’s severe cash crisis puts the company’s stock at significant risk of declining to $0 per share”.
According to New Constructs, Beyond Meats is significantly dependent on partners to market its products, competes in an industry with few entry barriers, and is increasingly in competition with businesses that manage its distribution. Given that competitors’ spending power surpasses Beyond Meat’s total operation, according to Trainer, “no realistic amount of spending can overcome these obstacles,” noting that Kroger Co.’s (KR) trailing 12-month free cash flow is $5.3 billion. In contrast, the market capitalization of Beyond Meat is slightly over $2 billion.
Beyond Meat stated in its most recent quarterly results that losing a partner harmed its foodservice sales. The manufacturer of plant-based Meat announced a fiscal first-quarter loss that was greater than anticipated and sales that fell short of FactSet projections.
After the market closes on Thursday, Beyond Meat releases its fiscal second-quarter results.
Beyond Meat’s stock increased 6.3% to $34.04 on Tuesday, surpassing the 0.4% increase in the S&P 500.
Out of the 19 analysts, FactSet is tracking, 2 have overweight or buy ratings for Beyond Meat, 12 have hold recommendations, and 5 have underweight or sell ratings.
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