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Will partnerships make Beyond Meat (BYND) palatable to investors?

Expanded partnerships with fast-food chains McDonald's and KFC's parent Yum! Brands to offer plant-based alternatives to popular meat dishes

Beyond Meat Inc. (NASDAQ: BYND) is probably the most innovative food company ever, for the new trend it brought in people’s eating habits is revolutionary. The turnaround efforts of the firm, which went public nearly two years ago, were scuttled by the virus-related disruption to some extent, at a time when the business model was being accepted across the market.

The concept of plant-based food that imitates meat was viewed with skepticism initially, but its popularity is increasing steadily amid the growing health and environmental awareness among people. Taking a cue from the positive momentum, several food companies and restaurant chains are working on their own plant-based food products.

The company, headquartered at El Segundo in California, is yet to create sustainable shareholder value, thanks to its inability to achieve break-even. Though market experts are optimistic about a recovery from the losing spree this year, they are cautious in their outlook for the stock. It is not the right time to buy/sell the stock, which is expected to drop about 11% this year. So, it makes sense to wait at least until the next quarterly report.

Though Beyond Meat tasted profit on a couple of occasions since the IPO, each time it slipped back into the negative territory. In the final three months of fiscal 2020, the retail business grew sharply, driving revenues up 4% to $102 million. That was partially offset by a 54% contraction in food services. The bottom-line was hurt by elevated costs and the company posted a wider loss of $0.34 per share. The numbers also missed the estimates.

Beyond Meat Q4 2020 earnings infographic

Since the primary cause of the ongoing slowdown is the impact of coronavirus on food services, it is safe to assume that Beyond Meat would get back on track once normalcy returns to the market. However, the recovery of food services will lag the sector due to the company’s exposure to certain severely affected channels. Growth initiatives, such as the new production facility in China and the Netherlands, despite the unfavorable market conditions, adds to the recovery prospects. The continuous investments in the business also contributed to last year’s losses.

Coinciding with the unimpressive fourth-quarter report, the management announced the expansion of partnerships with fast-food chains McDonald’s (MCD) and KFC’s parent Yum! Brands (YUM) to offer plant-based alternatives to popular meat dishes. For each brand, separate menus will be prepared, and the products include McPlant burger and Beyond Fried Chicken.

Beyond Meat earnings, revenue trend

“We are beginning to see some nascent evidence of an emergent near-term activity within the quick-serve restaurant space, including the national and select trials of Beyond Meat products at Pizza Hut U.S. and Pizza Hut U.K., respectively. Additionally, subsequent to the quarter, we also secured additional trials at Starbucks U.K. and Starbucks Middle East and initiated tests with McDonald’s in Sweden and Denmark. However, as we’ve seen throughout the course of the pandemic, it is extremely difficult to predict trends,” said Beyond Meat’s CEO Ethan Brown, commenting on the tie-ups.

Read management/analysts’ comments on quarterly reports

The encouraging report outweighed the dismal fourth-quarter outcome and the stock moved up on Thursday evening, though the uptick was short-lived. Despite the continued volatility, the shares gained 17% since the beginning of the year.

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Read the full conference call transcript here. It’s free!

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