It’s hard to be the next big thing.
Just ask Beyond Meat, whose stock has plunged 19% in premarket trading after releasing shockingly bad results.
Sales came in at $94 million, when Wall Street was looking for $132 million, after topping sales estimates in its first six quarters reported as a public company. Beyond blamed pantry stock in the second quarter for the miss.
Now, growth investors have to figure out what sales should be without all the Covid-related impacts.
It won’t be easy. This is an environment unlike any other, and Beyond faces problems beyond the virus. When a company creates a new category, others jump in. Beyond faces competition from upstarts like Impossible Foods and more established players like McDonald’s, which announced the McPlant Monday.
It’s essential that Beyond resumes growing—and quickly. Its shares trade for 132 times estimated 2022 earnings and 9 times estimated 2022 sales, predicated on rapid growth beyond 2022.
The situation isn’t hopeless. Two analysts upgraded Beyond shares Tuesday, and that will give shares some support. But Beyond Meat is in the penalty box until rapid sales growth resumes.
If it ever does.
—Al Root
*** GM’s Mary Barra on the future of electric vehicles, Spotify’s Harley Finkelstein on the transition in retail and Box’s Aaron Levie on the move to the cloud. Register here for Investing in Tech, this Thursday at 1 p.m.
***
McDonald’s Will Offer Meat-Free Patties
Fast-food giant McDonald’s said it would test its plant-based products in some markets next year.
- McDonald’s will offer “McPlant,” a line of meat alternatives that could include burgers, chicken and breakfast food, The Wall Street Journal reported. The meat alternative won’t be sourced from Beyond Meat.
- McDonald’s had a pilot program this year in Canada that sold patties made by Beyond Meat, a leader in plant-based products. The company declined to say which companies would supply the new items.
- McDonald’s stock fell Monday after its third-quarter earnings beat expectations. The fast-food giant earned an adjusted $2.22 a share on revenue of $5.42 billion. Analysts were looking for $1.91 a share on revenue of $5.4 billion. McDonald’s same-store sales are still suffering from a lack of commuters purchasing breakfast.
What’s Next: McDonald’s CEO Chris Kempczinski said local demand would determine where and when to introduce “McPlant” items, the Journal reported. Company execs also warned during an earnings call Monday that the resurgence of Covid-19 around the world is impacting McDonald’s business.
—Mary Romano
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Covid Cases Mount as Pfizer, Eli Lilly’s Products Show Promise
The U.S. surpassed 10 million total Covid-19 cases Monday and there are few signs that the resurgence of the virus will fade. New coronavirus cases topped 100,000 for the seventh day in a row, according to Johns Hopkins University. Cases are rising in nearly every state.
- Some states announced restrictions this week to help stop the spread of the deadly virus. Nebraska’s governor on Monday reintroduced social distancing policies and put a 25% capacity restriction on events. In Utah, Gov. Gary Herbert imposed a state of emergency Sunday and issued a statewide mask mandate.
- Joe Biden announced his coronavirus task force on Monday, calling the pandemic “one of the most important battles our administration will face.” The team will be led by Dr. David Kessler, a UC San Francisco professor; Dr. Vivek Murthy, who served as surgeon general; and Dr. Marcella Nunez-Smith, Yale professor and associate dean.
- For hunkered down humans, Pfizer’s Monday announcement that its Covid-19 vaccine developed in partnership with BioNTech showed 90%-plus effectiveness was welcome news. Shares of the biotech soared nearly 8% Monday. The news fueled a broader market rally which saw the Dow notching a new intraday record.
- The U.S. Food and Drug Administration on Monday issued an emergency use authorization for Eli Lilly’s Covid-19 treatment. The drug fills a gap in treatment among patients in the early stages of Covid-19 who aren’t hospitalized, according to The Wall Street Journal.
What’s Next: Pfizer seems to have given us a way out of this nightmare. If its vaccine still looks good in the final analysis, expected this month, it will be a validation of messenger-RNA technology—a new approach to vaccines, one that inserts genetic code into cells to get them producing proteins that provoke a protective antibody response.
—Bill Alpert, Matt Bemer
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EU Hits Amazon With Antitrust Charges, Opens New Probe
The European Commission has brought formal charges against Amazon for “illegally distorting competition” on the online retail market through its use of data on its platform’s independent sellers. The watchdog separately started a second probe into the online retail giant’s e-commerce practices.
- Commission Vice President Margrethe Vestager, who oversees the EU’s competition watchdog, said in a press conference on Tuesday that the accumulation of data from 800,000 vendors on more than a billion items fed directly into Amazon’s algorithms, allowing the group to then focus on the bestselling items.
- The move comes after a nearly two-year formal probe on Amazon’s “dual role” as a platform for third-party vendors and seller of its own goods. Vestager noted that Amazon had abused its dominant position in Germany and France, Europe’s largest markets.
- The new probe will focus on Amazon’s “buy box” that pops up when customers are shopping on the internet, and its Prime service. European authorities suspect Amazon of giving a preferred treatment to the independent vendors using its logistics and delivery services to the detriment of others.
- Amazon said in a release, published as Vestager was speaking, that it “disagreed with the preliminary assertions” of the Commission. The company “ represents less than 1% of the global retail market, and there are larger retailers in every country in which [it operates]’” it added.
- Amazon shares are up more than 60% this year, boosted by the rise of online sales due to the coronavirus pandemic. It lost 5% Monday on news that Pfizer’s Covid-19 vaccine had proven 90% effective in late-stage trials.
What’s Next: Vestager, who had already slapped more than €8 billion ($9.5 billion) of fines on Google, is reinforcing her reputation as a tough competition enforcer, and the scourge of Big Tech. Amazon is also the target of similar probes elsewhere, notably in the U.S. in California and the state of Washington.
—Pierre Briançon
***
Some Republicans Come to Trump’s Defense
Senate Majority Leader Mitch McConnell and others in the Republican party supported President Donald Trump’s challenge to Joe Biden’s projected victory.
- “Obviously, no states have yet certified their election results. We have at least one or two states that are already on track to a recount, and I believe the president may have legal challenges under way in at least five states,” McConnell said in a speech on the Senate floor Monday.
- In a memo Monday, Attorney General William Barr authorized federal prosecutors to investigate “clear and apparently-credible allegations of irregularities” that could affect the outcome of the election, according to The Wall Street Journal. The DOJ official in charge of investigating voter fraud stepped down from his post after the memo.
- Votes will be recounted in Georgia where Biden’s margin is slim. The Trump campaign may request recounts in other states. Since recounts rarely lead to significant shifts, Biden is expected to hold on to his lead. And the outcomes of Trump’s lawsuits have been mixed and inconsequential.
- On Monday, Republicans David Perdue and Kelly Loeffler—whose Senate seats are both up for grabs in Georgia’s January runoffs—called on Georgia’s secretary of state to resign. The two said in a joint press release that the “management of Georgia elections has become an embarrassment for our state.”
- The two did not provide evidence of illegal voting behavior. Georgia’s Secretary of State Brad Raffensperger, a Republican, rejected Purdue and Loeffler’s call for his resignation, adding “one of my duties involves helping to run elections for all Georgia voters.”
What’s Next: Maine Sen. Susan Collins congratulated Biden on Monday. Collins also said Trump should be afforded the opportunity to challenge the results, adding that the voting process “has not failed our country in more than 200 years, and it is not going to fail our country this year.” Register to join a live Barron’s Roundtable event today for more on the election’s impact on investing, business and policy.
—Matt Bemer
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Investing in a Post-Vaccine World
With news of a promising Covid vaccine, the outlook is improving for a rebound in the global economy. That means value stocks may beat growth stocks, small companies could outpace big ones, and gold may lose more luster, strategists say.
- Value topped growth on Monday. The iShares Russell 1000 Value exchange-traded fund rose 4.1% while the iShares Russell 1000 Growth ETF declined 1.7%.
- International stocks were ahead of the S&P 500 on Monday, with the iShares MSCI EAFE ETF gaining 2.9% while the S&P rose 1.2%.
- Gold futures fell 5%, to $1,854.40, as its haven status looks less important, and as U.S. rates rise.
What’s Next: “If we have a valid vaccine, that will be another huge stimulative force for economic growth,” wrote Jim Paulsen, chief investment strategist at the Leuthold Group, told Barron’s.
—Mary Romano
***
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—Newsletter edited by Stacy Ozol, Matt Bemer, Ben Levisohn
November 10, 2020 at 08:12PM
https://www.barrons.com/articles/beyond-meats-bad-day-shows-how-hard-it-is-to-be-the-next-big-thing-51605013939
Beyond Meat’s Bad Day Shows How Hard It Is to Be the Next Big Thing - Barron's
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