Beyond Meat, Inc. (BYND) is trading lower by more than 20% in Tuesday's pre-market after posting a much worse-than-expected third quarter 2020 earnings report. The plant-based meat maker lost $0.28 per share, defying expectations for a $0.05 profit, while revenue rose just 2.7% year over year to $94.4 million, more than $37 million below consensus of $132.2 million. A spokesman blamed COVID-19 for the quarter even though it should have benefited from stay-at-home measures and deals with fast food chains.

Key Takeaways

  • Beyond Meat missed third quarter earnings and revenue estimates by wide margins.
  • The report raises questions about long-term demand for plant-based meats.
  • The stock has sold off more than 20% overnight in reaction to the bearish report.
  • The decline could carry into the psychological $100 level in coming sessions.

The results raise doubts about long-term demand for plant-based meats. Many carnivores have tried the products, but the novelty of fake food may be wearing off, forcing Beyond and its rivals to rely on the smaller population of vegetarians and others seeking healthier lifestyles. The company inadvertently admitted slumping demand in the release, stating that freezer loading underpinned strong second quarter results. Unfortunately, customers may be letting freezer burn consume the product to avoid putting it on the dinner table.

The news added to Monday's 4% loss, bringing the two-day total to about 25%. Even worse, the stock rose 14 points in yesterday's session before settling with a seven-point loss, trapping a large crowd of newly minted shareholders in the post-close shocker. Remaining bulls are trying to make a stand in Tuesday's pre-market following the announcement of a Pizza Hut deal, but so far at least, the news isn't generating much interest.

Wall Street consensus was mixed prior to the earnings report, which is likely to trigger further downgrades. Beyond Meat stock is now rated as a "Hold" based upon two "Buy," six "Hold," and an uncomfortable four "Sell" recommendations. Price targets currently range from a low of $117 to a Street-high $180, while the stock is set to open Tuesday's session near the low target. This humble placement is unlikely to put a floor under price action, given the exceptionally weak metrics.

A consensus estimate is a forecast of a public company's projected earnings based on the combined estimates of all equity analysts that cover the stock. Generally, analysts predict a company's earnings per share (EPS) and revenue numbers for the quarter, fiscal year (FY), and future FYs. The size of the company and the number of analysts covering it will dictate the size of the pool from which the consensus estimate is derived.

Beyond Meat Daily Chart (2019 – 2020)

Chart showing the share price performance of Beyond Meat, Inc. (BYND)
TradingView.com

The company came public at $46 in May 2019 and entered an immediate uptrend that posted an all-time high at $239.71 just two months later. Price action eased into a trading range into October and broke down from support in the $130s, dropping into the double digits at the month's end. The stock bottomed out in the low $70s in December and bounced into January 2020, reversing at new resistance, ahead of a pandemic decline that broke the fourth quarter low before finding support just two points above the IPO opening print in March.

A bounce into June pierced resistance, hitting a 10-month high above $160. It mounted that barrier in September and reversed again in October after reaching the .786 Fibonacci selloff retracement level. Price action settled at the .50 retracement and broke down after the news, also breaking the 200-day exponential moving average (EMA). The decline has also sliced through mid-summer support at $120 in the pre-market, raising the odds for a second breakdown. The unfilled May 9 gap between $102 and $109 now looks like a magnetic target, crossing through the .618 rally retracement level.

Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used.

The Bottom Line

Beyond Meat stock is set to open Tuesday's session 30 points or more below Monday's close in reaction to an exceptionally weak third quarter earnings report.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.