Growing Pains

Beyond Meat's results

Image source: Davizro Photography, Devashish Rawat - Shutterstock

What's going on?

Beyond Meat – the stock market darling whose share price has bloomed over 800% since its initial public offering in May – reported growing revenue but also growing losses in quarterly results on Monday.

What does this mean?

Beyond Meat’s “plant-based beef” burger sales in the second quarter were almost 300% higher than a year ago – more than anticipated. The company did wilt a little, however, losing more money last quarter than investors thought it would. Up to now, Beyond Meat has refused to let the share price success go to its head, telling investors it expected to break even this year and predicting annual revenue of over $210 million. But a new deal with Dunkin’ Donuts might have sown the seeds for even more sales, pushing its predicted annual revenue to at least $240 million.

Why should I care?

For markets: The cream of the crop looks frothy.

Beyond Meat’s stock price currently values the company at over 60 times its estimated 2019 revenue. For context, loss-making Snap Inc. is “only” worth 14 times its revenue forecast. But despite Beyond Meat’s potential 170% revenue growth this year, investment bank analysts don’t appear convinced. None of them currently recommend buying its stock, and a host of investors appear to agree: almost half its shares are being “shorted” (investors, in other words, are betting their value will fall) [tweet this]. News of a forthcoming sale of extra shares didn’t impress them either, with the value of Beyond Meat’s existing stock falling 12% late on Monday.

Zooming out: Food platforms are having a bumper harvest too.

On Monday, European food delivery giant announced an agreement in principle to buy British competitor Just Eat for over $6 billion. Just Eat’s share price rose 25% – valuing it higher than the offer price, perhaps because investors are anticipating a rival counteroffer. Any merger could be good news for Just Eat’s put-upon shareholders: tough competition has limited the company’s earnings growth, and its shares have risen just 8% this year – compared to its takeout peers’ 40%.

Originally posted as part of the Finimize daily email.

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