DJ Beyond Meat Earnings Were Awesome. Here's Why Its Stock Is Plunging. -- Barrons.com

By Al Root

Go figure. Beyond Meat shares thudded 22% this past Tuesday in the backwash of earnings that were actually decent -- the most recent swerve in a stock that for much of the summer was one of the year's spectacular successes.

The plant-based-meat company reported earning six cents a share on $92 million in sales, marking its first profitable quarter as a public company. Sales were $10 million better than Wall Street expected. Beyond hiked its full-year sales guidance twice, first to $240 million in July, then to $270 million. Product demand remains high.

Beyond Meat came public at $25 a share in May and closed the first day at $66; the stock hit $234 in July, then traded below $100 ahead of Monday's release. By Friday, the stock was at $82, after a rally to $89 on Wednesday. Barron's suggested selling the stock on May 31 at $102. On Friday, Oct. 25, shares opened at $102.

What went wrong? In a word: volatility. Growth was high, products are new, and strong management execution has battled a steep starting valuation. Competition is rising. Then, last week, millions of Beyond Meat shares came off IPO lockup -- the 180-day period when insiders are mostly barred from selling. That created selling pressure in one of the market's most heavily shorted stocks.

Of course, all this make it impossible to predict where the shares will go next. In the meantime, investors might be better served to ponder whether they believe plant-based meat will become a multibillion global market. Wall Street isn't terribly helpful: Its estimates range from $15 billion to $40 billion by the end of the next decade.

--Al Root

Last Week

Riding an Earnings Wave

The S&P 500 rose 0.6% on Monday for a new high, with the Nasdaq close behind. Driving stocks: Upbeat chatter about China trade talks, expectations of a Federal Reserve rate cut, and decent corporate earnings. The Fed came through, the economy added 128,000 jobs in October, but trade talk was all over the map. Still, the week ended on more highs, with the Dow industrials up 1.4%, to 27,347.36, the S&P 500 rising 1.5%, to 3066.91, and the Nasdaq Composite climbing 1.7%, to 8386.40.

Impeachment, Phase 2

The House of Representatives passed impeachment procedures on mostly party lines as the inquiry moves on to public hearings. White House officials trooped in to testify, including Army Lt. Col. Alexander Vindman, an Iraq war veteran and top Ukraine expert on the National Security Council, who said he told superiors twice that inappropriate pressure was being applied to Ukraine. More positively for Trump: A U.S. Delta Force raid resulted in the death of Islamic State leader Abu Bakr al-Bhagdadi.

Fed Cuts and Pauses

The Federal Open Market Committee reduced federal-fund rates by a quarter point. In comments after the meeting, Federal Reserve Chairman Jerome Powell said any move to increase borrowing costs would come only after evidence of an uptick in inflation, now around 2%, and described the current policy stance as "appropriate."

Brexit: Three Times a Charm

United Kingdom Prime Minister Boris Johnson failed twice to get a two-thirds vote needed to call a new election, then won on the third try, after gaining Labour Party support. Johnson appears to have given up trying to pass a Brexit plan through Parliament, which he had declared "dead," making the bet that he could get a new one after the Dec. 12 elections. His Conservative Party leads in the polls, but lacks a majority.

The California Inferno

Wildfires spread throughout the state, as Santa Ana winds whipped down the canyons at hurricane-like speeds. Southern California, including the Getty Museum and Reagan Library, was threatened, while the Kincade Fire raced through Sonoma. To avoid accidental ignitions, Pacific Gas & Electric shut off power to millions. Early in the week, bankrupt PG&E reported problems with power lines near the start of the Kincade Fire.

Annals of Deal Making

French luxury conglomerate LVMH Moët Hennessy Louis Vuitton made a $120 a share bid for Tiffany....Fiat Chrysler Automobiles, after failing to do a deal with Renault, agreed to merge with Peugeot maker Groupe PSA in a more than $50 billion deal... AT&T came to an agreement with Elliott Management to forgo acquisitions, buy back shares, and cut costs...Altria Group wrote down its stake in Juul Labs by $4.5 billion...Alphabet to buy Fitbit for $2.1 billion.

Write to Al Root at allen.root@dowjones.com

(END) Dow Jones Newswires

November 01, 2019 20:53 ET (00:53 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.