Beyond Meat (BYON) is facing a wave of skepticism from analysts, with BofA Securities analyst Curtis Nagle downgrading the company’s stock to ‘Underperform’ from ‘Neutral’. This move reflects growing concerns about the effectiveness of Beyond’s ongoing turnaround efforts.
Nagle, who lowered his price forecast to $6 from $12.50, expressed uncertainty about the timing and potential success of these efforts. Despite recent initiatives, including cost reductions and a shift towards an asset-light model, the analyst remains concerned by the persistent decline in orders. This issue, acknowledged by Beyond’s management during an Investor Event, highlights the company’s struggle to regain traction in the market.
While Beyond has managed to boost EBITDA through a reduction in marketing spending, Nagle notes that customer affinity for the brand appears heavily reliant on marketing and promotional activities. This dependence raises concerns about the likelihood of near-term improvements in customer engagement.
Beyond’s efforts to revive its three brands are further complicated by three brand relaunches and two new partnerships. These initiatives, while intended to boost sales, also add significant challenges to an already complex landscape. The company’s dwindling cash reserves only exacerbate these concerns.
Despite significant strides in reducing fixed costs and transitioning to an asset-light model, Beyond has yet to reverse its revenue declines. Nagle warns that further cuts to marketing spending could put even more pressure on revenues than anticipated.
While other eCommerce retailers have witnessed success by expanding their physical presence—as seen with Wayfair Inc.’s (W) early success with its Wilmette store—Nagle expresses doubts about whether partnering with struggling retailers will effectively revitalize Beyond’s declining revenue trends. He suggests that Beyond’s own turnaround efforts and the lackluster customer response to its products create uncertainty surrounding the success of these partnerships.
Looking ahead, Nagle projects Beyond to register a FY24 earnings per share loss of $4.02, compared to his earlier projection of a $3.67 loss per share.
On Friday, BYON shares were trading lower by 1.35% at $6.60.