Beyond Meat Deal With Walmart Rallies Stock

Photo by Smith Collection/Gado/Getty Images

Getty Images

Beyond Meat stock (NASDAQ: BYND) is experiencing an incredible rally, increasing over 700% in the last five days to $6.73 and continuing to rise during intra-day market activity. For a stock that many had dismissed, this increase is astonishing, particularly when compared to the S&P 500’s modest 0.7% rise during the same timeframe.

What ignited this? A newly expanded distribution agreement with Walmart, which will make select Beyond products, such as the Beyond Burger 6-Pack and Beyond Chicken Pieces, available in over 2,000 U.S. Walmart locations. This is a significant visibility enhancement for a brand that has been struggling to maintain its relevance. Retail expansion announcements like this usually generate optimism about a possible sales recovery, but in the case of Beyond Meat, the excitement seems to be driven more by momentum than by strong fundamentals.

That being said, if you are seeking upward potential with less volatility than holding a single stock, you might want to consider the High Quality Portfolio. It has considerably outperformed its benchmark—a mix of the S&P 500, Russell, and S&P MidCap indexes—and has provided returns exceeding 105% since its inception. What explains this? As a group, HQ Portfolio stocks have generated better returns with lower risk compared to the benchmark index, avoiding major volatility, as demonstrated in HQ Portfolio performance metrics. Additionally, take a look at – Buy The Fear? Why Deckers’ 50% Slide Could Be Overdone

A Rebranding Push Amid Deep Struggles

The company has been rebranding itself, even omitting “Meat” from some of its materials to communicate a transition toward being a more expansive plant-protein company. This is a narrative strategy aimed at informing investors that Beyond is no longer solely focused on faux burgers, but on transforming how consumers perceive protein.

Despite this, the underlying fundamentals are still severely challenged. Revenue has continuously decreased, down approximately 5% over the last year and averaging a 13% annual decline over the last three years. In its most recent quarter, sales dropped nearly 20% year-over-year, highlighting that consumer interest in plant-based meat has diminished from the high levels experienced during the pandemic.

Weak Profitability and Heavy Losses

Beyond Meat’s financials depict a bleak outlook. The company recorded an operating loss of around $160 million over the last year, with an operating margin of approximately -53%. Its net margin is equally concerning, at -51%, and cash flow is also significantly negative.

In summary, every dollar of revenue incurs a substantial cost. Inflationary pressures, increased competition from both traditional meat producers and new plant-based entrants, along with a decline in consumer excitement, have all impacted profitability.

Debt Burden and Fragile Stability

Compounding the challenges, Beyond Meat’s balance sheet appears under pressure. The company has around $1.3 billion in debt, and despite having $103 million in cash available, liquidity is constrained and leverage risk is considerable.

This disparity leaves little margin for error. For a company that is still consuming cash, debt refinancing or capital raising could become a continuous issue if the underlying fundamentals do not improve.

The Speculative Setup

So, what accounts for the sudden rally? Part of the answer lies in market psychology. Beyond Meat is among the most shorted stocks in the market. When buying pressure arises from retail investors trying to capitalize on news or shorts rushing to cover their positions, prices can skyrocket quickly. These meme-style surges are powerful yet often temporary, and they tend to diverge significantly from the company’s actual business performance.

Long-term investors should keep in mind: Beyond Meat has experienced volatile cycles previously. The stock plummeted 97% from its peak of $192 in 2021 to less than $6 by late 2023 and still trades at a small fraction of its previous value. Even with the recent surge, it remains far from the path to recovery.

Bottom Line

Beyond Meat’s expansion with Walmart provides a much-needed increase in visibility, but visibility does not equate to viability. The company’s sales are declining, losses are significant, and debt levels are alarming.

The latest rally in the stock may be thrilling. However, unless Beyond can convert partnerships like Walmart’s into substantial, enduring growth and demonstrate that its new “plant-protein” identity genuinely resonates with consumers, this movement appears more speculative than foundational.

At this time, BYND still represents a high-risk turnaround narrative with abundant narrative momentum but limited financial support.

If this degree of risk makes you uncomfortable, you might want to consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap benchmark (a combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver strong returns to investors. What is the reason for this? The rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provides a flexible approach to take advantage of favorable market conditions while minimizing losses in downturns, as detailed in RV Portfolio performance metrics.