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What will Q2 earnings do for the Beyond Meat share price?

A Beyond Meat sausage charcuterie board
Image: Beyond Meat

Q2 earnings are due from Beyond Meat (NASDAQ: BYND) on 5 August, so what might they bring? I think a big price swing has to be a possibility, though I say that for only one reason. The Beyond Meat share price has had a very volatile 12 months.

Since August a year ago, Beyond Meat stock has lurched between rapid spikes taking it up 50%, and slumps taking it into negative territory, as deep as minus 20%. At the time of writing, we’re looking at a 12-month decline of 4%. I know potential growth stocks often show multiple rises and falls in their early years, but this is getting close to high-blood-pressure territory.

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Anyway, from a peak of $240 not long after IPO in 2019, the price is now down 50%. But I feel anything could have happened between my writing and your reading these words!

But what is Beyond Meat, and why the excitement? To say it makes plant-based burgers would not be giving it full credit. It’s actually the world’s biggest plant-based meat substitute company. Fake meat in burgers and sausages is nothing new. But apparently it’s getting more realistic these days. And a number of trends are coming together to make the market look especially attractive.

Vegan fast food

For reasons ranging from increasing health awareness, to reducing the effects of bovine flatulence on climate change, meat consumption is becoming increasingly undesirable. Then there’s the enormous and growing fast food market.

On that front, Beyond Meat has a deal with McDonald’s, as well as other outlets. I have to say that “Good enough for McDonald’s” wouldn’t get me rushing out to buy the stuff, especially not at £4.40 for two burgers at Tesco. But I’m not the target market, and I’m sure prices will come down due to research and economies of scale.

So yes, I do think the future demand is likely to be there. But the one thing above all else that holds me back is valuation. Without being able to get a handle on that, I can’t work out a fair level for the Beyond Meat share price. And judging by the price chart to date, nobody else can either.

The company’s Q1 earnings report revealed an 11.4% rise in revenue to a bit over $108m. That’s impressive, but the bottom line showed a net loss of $27.3m. And there’s big debt on the books, to the tune of $1.1bn.

Beyond Meat share price threat?

I can see another potential downside in the shape of competition. And that (especially price competition) could be particularly dangerous: until Beyond Meat gets its economies going, its prices competitive with meat, and it’s business generating sustainable profits, at least.

Saying all that, estimates suggest the global meat substitute market could be worth $7.5bn by 2025. My gut feeling is that the Beyond Meat share price might turn out to be a bargain buy at the moment, even if the burgers aren’t yet. Still, I don’t invest on gut feelings. And I don’t buy loss-making companies with huge debts.

So it’s not for me, not now. But I’ll be watching carefully. Oh, and I reckon anything could happen on Q2 earnings day.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Beyond Meat, Inc. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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