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On April 2, I recommended you grab Beyond Meat shares, mainly based on positive feelings about a China launch. The shares have appreciated over 60% since my call, so it’s time to revisit the story.
Beyond Meat (BYND - Free Report) has since said that it will leverage Starbucks’ (SBUX - Free Report) 3,300-odd stores across China as that market continues to see surging demand for faux meat, driven by a meat shortage, an existing taste for the thing and growing concerns about the environment (among a few). And since China is beginning to open restaurants, the timing couldn’t have been better. In fact, that’s probably why Yum! Brands’ (YUM - Free Report) KFC will also be launching Beyond products in China this week.
Beyond Meat is expected to report results next week. The company has most of its revenue coming from the U.S. and Europe, which have been particularly impacted by the pandemic. Moreover, a sizeable chunk (51%) of its business comes from its Restaurant and Food Service partnerships because those have picked up of late. And again, this is the segment that has been hard-hit by the pandemic.
So while its China business is just about taking off, there won’t be any impact on the March quarter. On the other hand, the weakness in its existing markets will tell on its first-quarter results.
Beyond Meat will have stock on its hands and we don’t know how well it will be able to store this. We also don’t know how much it will be able to redirect to the Retail segment, which should have picked up as more people cook at home in response to the pandemic. Also, given the nature of the product, there won’t be something like pent up demand, so whatever it stores will need storing for some time. Being able to transport extra production to China could be a good thing, but we don’t know if that was done, or even possible.
We also need more information about how its factories are functioning during the lockdown, whether it is resizing its staff and any other measures it may be taking to deal with the crisis.
The company could also see rising costs related to its China expansion, which while being necessary and positive on its own, could make an otherwise weak quarter appear even worse than it really is.
So yes, while they haven’t reached their 52-week high yet, and it’s really impossible to say how the market will react for sure, I think the shares are set for some battering in the not-too-distant future. The KFC launch in China likely won’t be enough to keep the shares up.
Since I continue to believe in the longer term potential of these shares, it seems like a good idea to offload some, take some gains, while hanging on to a portion for the longer term.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Time to Take Gains on Beyond Meat (BYND) Shares?
On April 2, I recommended you grab Beyond Meat shares, mainly based on positive feelings about a China launch. The shares have appreciated over 60% since my call, so it’s time to revisit the story.
Beyond Meat (BYND - Free Report) has since said that it will leverage Starbucks’ (SBUX - Free Report) 3,300-odd stores across China as that market continues to see surging demand for faux meat, driven by a meat shortage, an existing taste for the thing and growing concerns about the environment (among a few). And since China is beginning to open restaurants, the timing couldn’t have been better. In fact, that’s probably why Yum! Brands’ (YUM - Free Report) KFC will also be launching Beyond products in China this week.
Beyond Meat is expected to report results next week. The company has most of its revenue coming from the U.S. and Europe, which have been particularly impacted by the pandemic. Moreover, a sizeable chunk (51%) of its business comes from its Restaurant and Food Service partnerships because those have picked up of late. And again, this is the segment that has been hard-hit by the pandemic.
So while its China business is just about taking off, there won’t be any impact on the March quarter. On the other hand, the weakness in its existing markets will tell on its first-quarter results.
Beyond Meat will have stock on its hands and we don’t know how well it will be able to store this. We also don’t know how much it will be able to redirect to the Retail segment, which should have picked up as more people cook at home in response to the pandemic. Also, given the nature of the product, there won’t be something like pent up demand, so whatever it stores will need storing for some time. Being able to transport extra production to China could be a good thing, but we don’t know if that was done, or even possible.
We also need more information about how its factories are functioning during the lockdown, whether it is resizing its staff and any other measures it may be taking to deal with the crisis.
The company could also see rising costs related to its China expansion, which while being necessary and positive on its own, could make an otherwise weak quarter appear even worse than it really is.
So yes, while they haven’t reached their 52-week high yet, and it’s really impossible to say how the market will react for sure, I think the shares are set for some battering in the not-too-distant future. The KFC launch in China likely won’t be enough to keep the shares up.
Since I continue to believe in the longer term potential of these shares, it seems like a good idea to offload some, take some gains, while hanging on to a portion for the longer term.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>