Is There a Future for Beyond Meat?

The past several years have been rough for Beyond Meat (NASDAQ: BYND), but that didn't stop the plant-based meat company's shares from becoming one of the top meme stocks last month. In fact, Beyond Meat's precarious state may be the reason behind last month's meme mania.

However, flash forward to now, and shares have already retreated considerably. Although the company itself may survive, there could be more pain ahead for investors.

A busted growth story for quite some time

Image source: Getty Images.

Up until the early 2020s, Beyond Meat was one of the most promising growth stocks. The rising popularity of plant-based diets pointed to further growth ahead. However, starting in 2021, the company's sales began to decline. This was due to a combination of competition from other alternative meat brands like Impossible Foods, coupled with the plant-based diet lifestyle trend peaking in popularity.

Already unprofitable, declining sales sank Beyond Meat deeper in the red. At first, existing cash covered these losses. Over the past two years, however, the company has had to sell more stock to raise money, leading to share dilution. Together, these factors caused shares to fall over 99% from their all-time high.

Why the meme stock run failed to last

Struggling and caught in a dilution spiral, Beyond Meat became a prime target for short-sellers. However, last month, as short interest spiked following the announcement of a highly dilutive debt restructuring plan, meme stock speculators started buying en masse to trigger a short squeeze.

This caused Beyond Meat to rally from around $0.55 per share to as much as $7.69 per share in a matter of days. However, after the company released lackluster preliminary quarterly results on Oct. 24, the "meme mania" quickly gave way to another massive sell-off.

What's next for Beyond Meat?

Thanks to the debt restructuring deal, Beyond Meat has staved off bankruptcy for now. However, unless the company quickly executes an effective turnaround plan, one that prioritizes profitability, the dilution spiral will likely continue. Existing shareholders would be wise to sell the stock; otherwise, stay away.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beyond Meat. The Motley Fool has a disclosure policy.