2019 has been a year of IPOs designed to make insiders rich at new investors’ expense. That was the case in Uber, Lyft and WeWork’s failed IPO attempt. Beyond Meat looked like an outlier to this trend, before last month. Beyond Meat was absolutely delicious at the IPO, soaring from a planned $25 IPO price to a high of $240 in August 2019. However, starting on October 30, 2019, the day that the 180-day lock-up period expired for insiders, Beyond Meat shares took a nose dive down to $76.67.
Beyond Meat is different from the other unicorn IPOs of 2019 in that there is a clear path to profitability. The company’s sales increased 250% in the 3rd quarter of 2019, to $92 million. Net income was $4.1 million, proving this young market disruptor company is turning profitable, despite the rapid growth and need for build-out. Beyond Meat has burgers, sausages and even taco meat available at your grocery store, but will also be offered at Dunkin, TGI Fridays, Carl’s Jr., Del Taco, Subway and even in a test for MacDonald’s Canada. Veterans from Tesla, Amazon, Coca-Cola and Nike have jumped on board to help in Beyond Meat’s C-Suite.
Beyond Meat’s share price woes have less to do with sales and growth potential, and are more just a valuation concern – and a liquidation event for insiders. Insiders who have had skin in the game for years were itching to turn paper money into profit. Road show investors who thought their shares were worth $25/share, couldn’t resist selling at almost 10 times that amount.
Beyond Meat is projecting annual net revenues of $265-$275 million. That is 3 times as much as the net revenues in 2018, at $88 million. However, the estimates indicate that the 4th quarter net revenues might be under $76 million, which would be lower than 3rd quarter’s $92 million. Given the all-stars on the team, the popularity of the product and the growing distribution channels, that’s a puzzling turn of events. Beyond Meat’s CFO Mark Nelson explained in the 3rd quarter 2019 earnings call that the 3rd quarter is Beyond Meat’s seasonally strong quarter due to grilling season.
So, is Beyond Meat on sale at $76.67? It’s certainly more affordable than $240/share! Given the growth potential of the $1.4 trillion marketplace of grilled protein, and the team in place, the opportunity should be tasty and juicy going forward. However, as long as insiders continue to sell en masse, the share price will continue to slide. The current price is well beneath most analyst targets, however. And insiders who continue to sell are taking a substantial haircut on the margins they enjoyed last month.
There is one caveat, however. This is the late stage of the business cycle. So, if you throw a Beyond Meat patty on the barbie, be sure to watch it closely so that it doesn’t burn. As investors have seen since the company began trading publicly on May 28, 2019, leaving your shares on the grill too long can result in ashes.
About Natalie Wynne Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She is the co-creator of the Earth Gratitude project and the author of the Amazon bestsellers The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is (aka You Vs. Wall Street in paperback). She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 2nd edition of The ABCs of Money was released in 2018.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.