Beyond Meat's Odds of Beating Earnings Just Hit 21% -- Is This the Quarter the Stock Finally Breaks?

Is it time to place a bet on Beyond Meat (NASDAQ: BYND) stock? After all, according to prediction markets operator Polymarket, the odds of the company topping analyst estimates for its fourth quarter are on the rise (the alt-meat specialist has scheduled the earnings release for the period on Wednesday).

If it does achieve this feat, many investors would be surprised, since the company has a recent history of missing (on earnings, at least). Here's my take on whether a beat or two would propel the stock to impressive highs.

A regular dip into the red

Although it's not something Beyond Meat brags about, one sort of advantage its stock has is that it's quite beaten down, so a bounce from the floor is conceivable. The shares have lost nearly 11% year to date, while the benchmark S&P 500 index has essentially traded flat.

Image source: Beyond Meat.

There are numerous factors behind this lack of popularity. A major one is simple fundamentals -- since its 2019 initial public offering (IPO), Beyond Meat has posted a grand total of two quarters with headline net income; all others have been in the red, at times deeply so.

Another is the rather stiff competition the company faces. It's not the only alt-meat game in town. Its top rival, Impossible Foods, is a direct, determined, and quite effective competitor that has made significant inroads into the crucial fast-food segment. Adding to that headache for Beyond Meat, Impossible has reportedly been considering an IPO. A major peer with fattened coffers will be quite the challenge for the already chronically unprofitable Beyond Meat.

As if that weren't daunting enough, major food brands have also gotten aboard the plant-based train. Packaged-food segment mainstay Conagra Brands has a presence with its relatively extensive Gardein line. Kellanova has also gotten into the act with MorningStar Farms, whose products are common sights in supermarket freezers.

Modest expectations

Given the company's historic performance and ever-mounting competitive challenges, analysts tracking Beyond Meat are not expecting greatness in the fourth quarter.

According to data compiled by Yahoo! Finance, they're collectively modeling a year-over-year decline of almost 17% in revenue, to $63.8 million for the period. On a slightly more positive note, while the consensus is still for a net loss, it should be much narrower -- $0.10 per share, compared with the year-ago shortfall of $0.65. Again, though, we have to bear in mind that Beyond Meat has a history of earnings misses, so that $0.10 estimate might be optimistic.

I'm not seeing any indications that Beyond Meat can pull off a surprise beat this quarter, given the factors above. Even if it does, I doubt the investor euphoria will last long -- one decent (or even impressive) quarter doesn't magically erase a difficult history, and market players can have long memories. I don't think the stock will rocket after earnings, and I wouldn't invest in it personally.

Eric Volkman 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.