Beyond Meat (NASDAQ: BYND) released a mostly positive 2Q 2019 earnings report after the market closed on Monday. The Los Angeles-area company reported a net loss of 24 cents per share, or $9.4 million, compared to an average net loss expectation of 8 cents per share, according to data from Refinitiv. This was slightly higher than the $7.4 million net loss last year.
A windfall came in the company's revenue, however. A slew of restaurant deals coinciding with Beyond Meat's recent IPO-related media coverage and blockbuster stock performance—shares are up nearly 800% since the company's debut—drove revenue up 287% to $67.3 million, compared to the relatively tiny $17.4 million seen in 2Q 2018.
While shares were mostly unchanged immediately following the earnings release, a stomach-churning selloff hit the tape shortly thereafter, following an announcement that the company will conduct a secondary offering just shy of three months following its May public debut. The news kicked off an after-hours drop in the stock price that continued into Tuesday.
Specifically, 3 million shares will come from stockholders, and 250,000 new shares will be issued at a price yet to be determined. The post-IPO lockup period was originally set to expire in late October, but a waiver from Goldman Sachs and JP Morgan, which underwrote the offering, allows the insiders to dump shares ahead of that agreed-upon date. Beyond Meat will only receive funding from the new shares being issued, which at Tuesday's closing price would be worth around $49 million.
Kleiner Perkins will sell about 600,000 shares, equivalent to roughly 7.7% of its total stake in the company, while Obvious Ventures will unload around 350,000 of its nearly 4.5 million shares, per an SEC filing. CEO Ethan Brown will sell roughly 39,000, CFO Mark Nelson will sell more than 55,000, and other unlisted employees will rid themselves of over 41,000 shares.
Beyond Meat's stock closed down more than 12% on Tuesday at $194.76, after falling as low as $188.77 earlier in the day; the share price had risen to almost $235 late last week. The company reported $277 million in cash on hand with $30.5 million in outstanding debt as of June 29
Bubble territoryBeyond Meat's outsized market cap, which stood at $11.7 billion as of the closing bell Tuesday, has led many analysts to call the stock a bubble. Prior to going public, the company held a much smaller $1.35 billion valuation after a $50 million Series H last November. At its IPO price of $25, the company held an approximate $1.5 billion market cap.
In Beyond Meat's favor, Barclays forecast the meat alternative industry to be worth over $140 billion by 2029. If Beyond Meat's stock were to be pricing in upwards of a decade of growth, its present-day market cap would hypothetically place the company as accounting for roughly a 10th of Barclays' industry valuation estimate. While this is a generous hypothetical situation, such a context makes the current market cap seem loosely understandable under optimal circumstances.
However, with competitors such as Bay Area-based Impossible Foods, England's Meatless Farm and Seattle-based Field Roast all beefing up their grabs for market share, it is difficult to conclude whether Beyond Meat, or any one brand, could ever achieve such a large chunk of the industry's worth.
With the company increasing revenue guidance to a forecasted $240 million for FY 2019, a figure that would represent a 170% YoY growth, the meat alternative provider has a long way to go toward validating its current priced-for-perfection valuation.
Featured image courtesy of Beyond Meat