Beyond Meat’s cash burn puts stock at risk of falling to $0, New Constructs warns

Beyond Meat is the latest addition to the list of “zombie stocks” compiled by independent equity research firm New Constructs.

The research firm, which uses machine learning and natural language processing to analyze corporate records and model financial returns, warns that Beyond Meat Inc. BYND,
+3.90%
has a high risk of falling to $0 per share.

“Beyond Meat needs to dramatically reduce its costs and reduce its cash or it will go bankrupt,” New Constructs CEO David Trainer wrote in a note released Tuesday. “Companies with big cash and little cash on hand are dangerous in any market, but especially now.”

Shares of Beyond Meat are down 47.8% in 2022 and 72.2% over the past 12 months, compared with declines of 13.2% and 6.4%, respectively, for the S&P 500 SPX.
-0.67%.

Look now: Where can you try the McDonald’s McPlant burger without meat? Analysts are having trouble tracking Beyond Meat’s offering on U.S. menus

“Beyond Meat has failed to generate any positive free cash flow since going public in 2019,” Trainer wrote, adding that, since 2018, the company has burned through $1 billion in free cash flow.

The cash drain at Beyond Meat shows no signs of slowing down, as the company slashed $635 million in free cash flow during the trailing 12-month period ending in the first quarter of 2022, according to Trainer. “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 for 10 months beyond 1Q22,” he wrote. “Raising additional capital to finance further cash burn would likely be costly and bad news for existing and new shareholders.”

In that context, New Constructs has added Beyond Meat to its “zombie stock” list, which includes Carvana Co. CVNA,
+12.86%,
Freshpet Inc. FRP,
+0.57%
and Peloton Interactive Inc. PTON,
+10.63%.

“Beyond Meat’s severe cash crunch puts the company’s stock at significant risk of falling to $0 per share,” Trainer added.

Look now: These ‘zombie’ companies could feel the cash burn, New Constructs warns

New Constructs adds that Beyond Meats relies heavily on partners to promote its products, operates in a business with few barriers to entry and increasingly competes with the companies that control its distribution. “No realistic amount of spending can overcome these hurdles given competitors’ spending ability to dwarf Beyond Meat’s entire operation,” Trainer said, adding that Kroger Co.
+0.09%
Trailing 12-month free cash flow is $5.3 billion. By comparison, Beyond Meat has a market cap of just over $2 billion.

In its most recent quarterly results, Beyond Meat said its revenue was hit by a decline in food services after the loss of a partner. The plant-based meat company reported a bigger-than-expected fiscal loss and first-quarter revenue that missed FactSet expectations.

Beyond Meat reports its fiscal second quarter results after the market closes on Thursday.

Shares of Beyond Meat rose 6.3% to $34.04 on Tuesday, outperforming the S&P 500’s 0.4% gain.

Of the 19 analysts tracked by FactSet, two have an overweight or buy rating, 12 have a hold rating and 5 have an underweight or sell rating on Beyond Meat.

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