Beyond Meat Earnings Are Coming. Here's What To Expect. - Barron's

Photograph by Daniel Acker/Bloomberg

Get ready for volatility when Beyond Meat reports earnings Thursday evening, its first quarterly report as a public company. Beyond Meat’s soaring stock has made it a darling of growth investors, while earning the ire of prominent short sellers such as Citron’s Andrew Left.

Beyond Meat shares (ticker: BYND) have performed, well, beyond expectations since the company’s initial public offering on May 1. The stock is up 300% from its $25 offering price and 118% from its opening trades at $46 a share. That makes Beyond the best performing unicorn IPO this year, based on Barron’s calculations. (A so-called unicorn is a privately held business worth more than $1 billion. Several unicorns, including Uber Technologies (UBER) and Lyft (LYFT), have also gone public in 2019.)

At recent prices above $100 a share, Beyond Meat is valued at more than $6 billion, or more than 29 times estimated 2019 sales. That high valuation is why Barron’s said in a recent article we are cautious on the stock, despite liking the Beyond Burger. We concluded that the company has to grow like Google parent Alphabet (GOOGL) did for a decade after its IPO to come close to justifying the current valuation.

We don’t know what’s going to happen when the company reports earnings on Thursday, but we expect volatility. Consider, more than 30% of the shares available for trading have been sold short and the borrowing costs to short Beyond ’s stock have exploded. Investors sell shares they don’t own—a so-called short sale—when they expect a stock to drop. Short sellers have to pay borrowing costs to short a stock, and when borrowing costs are high it means it is difficult to find additional shares to sell short.

As earnings approach, here are some key points to watch, along with some recent history.

• Wall Street expects the company to report an adjusted loss of 15 cents a share from $38.9 million in sales.

• In the company’s IPO prospectus filed with the Securities and Exchange Commission earlier this year, Beyond Meat’s management said it expects to generate $38 million to $40 million in sales, as well as $9.5 million to $10.5 million in gross profit,

• For the second quarter of 2019 Wall Street expects $48.3 million in sales, up 24% from the previous quarter. It isn’t clear whether the company will offer new forward guidance for the coming quarter or for the full year. For 2019, Wall Street expects the company to generate about $205 million in sales.

• Beyond top line growth, partnerships with new quick-service restaurants and retailers will be an important topic for investors. More distribution and retail space for Beyond Meat’s vegan products are significant for sales growth. JP Morgan analyst Ken Goldman thinks the company will announce another fast-food partnership by the end of 2019. Beyond Meat’s Beyond Burger is already available in outlets such as Amazon.com -owned (AMZN) Whole Foods, Red Robin Gourmet Burgers (RRGB) and privately held Bareburger.

• Bernstein analyst Alexia Howard expects the company to talk about repeat purchase data of the company’s Beyond Burger and Beyond Sausage. This is another nonfinancial metric that investors can use to estimate futures sales for the new meatless products. Howard rates Beyond Meat shares Outperform, with an $81 price target, 19% lower than recent trading levels. Howard initiated coverage of the stock on May 6 when Beyond Meat shares were trading at $74.79. This will be one of the first chances Howard has to update her numbers after the stock’s breathtaking run.

• Capacity expansion to meet growing demand as well as the potential for overseas market expansion are two other areas investors may hear about on Thursday.

• Finally, new competition may be addressed. Tyson (TSN), for instance, plans to invest in alternative-meat products and Nestlé (NESN.Switzerland) is bringing its Sweet Earth Awesome Burger to the U.S. sometime this year.

Write to Al Root at allen.root@dowjones.com

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