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- Harvest Returns | February 27th, 2024
Harvest Returns | February 27th, 2024
TOGETHER WITH
Today’s report is brought to you by Harvest Returns. Grow your wealth with passive investments in farming and agribusiness.
[ good morning ]
Here’s everything you need to know today
With our inflation outlook getting clearer and clearer—we’re actually getting a solid view of how the food business is adapting to the current efficiency meta.
Food costs have managed to stabilize, but the industry is still digesting a mountain of new costs and considerations in Q1. Despite that, we’re starting to see some wild efficiency breakouts across the food space.
Meanwhile, separate negative trends are only starting to intensify as America’s eating (and drinking) habits shift wildly.
So—with major inflation data not dropping until tomorrow—it turns out that the biggest stories hitting the market this morning all relate to the food and drink business. Let’s check out the major headlines and see what trends we can pick out here.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ plant-based meat ]
Beyond Meat Skyrockets on Searing Margin Guidance
Can the fake meat empire recover from a 99% drawdown?
BREAKING NEWS
The bulls are back in force for plant-based meat mogul Beyond Meat. Despite continuing their years-long slide, Beyond jumped over 50% in early trading. What does the market like so much here?
WHAT HAPPENED
On the surface, this was another brutal earnings report for Beyond Meat. Their revenue declined (again) to $73 million in Q4 while their net loss expanded drastically to $155 million.
Beyond Meat famously IPO’d in the cheap-capital days of 2019 and improbably surged to a ludicrous $14 billion market cap—and it’s experienced nothing but a steep decline ever since. Beyond had a tough 2023 where revenue did nothing but decline as consumers tightened their budgets and sought out cheaper alternatives. However, Beyond Meat did nothing but improve their YoY margin gains at the same time. Now—despite printing an expanded YoY net loss for the first time in 5 quarters—they’ve finally printed guidance that The Street likes to see.
COMPLETE TRANSFORMATION
Beyond managed to get Wall Street back on their side by announcing a huge new wave of cost-cutting initiatives that will take place across the next 12-to-18 months. As a part of this, Beyond is forecasting gross margins in the mid-to-high teens in 2024—a massive reversal of previous trends. This market loves efficiency above all else and investors are piling into Beyond Meat’s stock.
WHY IT MATTERS
The scale of the price action here is more of a reflection of Beyond’s small market cap and lower volumes. However, if Beyond Meat can actually hit their efficiency goals after 5 years of churning through cash—the company might be able to establish a firm enough foothold to grow. For now, investors will jump on anything that even remotely promises profits, so Beyond Meat stock surged more than 60% in early trading.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | 0.81% | 2.01% | 48.43% |
| Consumer Disc. | 0.33% | 6.06% | 25.35% |
| Consumer Stap. | 0.01% | 2.28% | 2.99% |
| Energy | -0.43% | 2.10% | 0.14% |
| Financials | 0.27% | 4.36% | 12.63% |
| Health Care | -0.24% | 5.27% | 14.79% |
| Industrials | 0.15% | 6.09% | 18.95% |
| Materials | 0.37% | 5.07% | 6.37% |
| Real Estate | 0.08% | -0.44% | 0.24% |
| Technology | 0.09% | 1.82% | 50.81% |
| Utilities | 1.89% | 1.04% | -6.03% |
*Market data based on standard trading hours and calculated close to close
[ beer ]
Boston Beer Falls Flat as Beer Demand Fizzles Out
Sam Adams doesn’t have the reach he once did
BREAKING NEWS
Boston Beer Company—the brewer of Sam Adams—crashed over 10% this morning as a wave of uncertainty washed over the stock. Profits are down and their CEO is retiring. Why the sudden slump?
WHAT HAPPENED
Starting with the good news—since there isn’t much: Boston Beer beat The Street’s expectations with revenue of $417 million for Q4. That’s ‘only’ a 12% decline YoY—but analysts projected a lot worse. However, Boston Beer also generated a much larger loss than expected—burning $18.1 million in the process. These losses are much larger than last year as well. Nothing sparks a selloff like lower revenues and bleaker profits.
BEERPOCALYPSE
It’s no secret that the wider alcohol business has been in decline for a few years now. But, beer was the last bastion of growth and profitability in the space. With brewers like Boston Beer suddenly facing a lot more pressure—investors are getting very skittish.
Those fears are more than amplified after Boston Beer’s shipments also declined 12% YoY. Even Boston’s newer products like Truly Hard Seltzer fell as consumers are moving on from booze en masse.
To cap off all the bear sentiment, Boston Beer also announced a CEO succession plan and weaker guidance for 2024. Sam Adams suddenly has nothing but uncertainty in their future.
WHY IT MATTERS
It’s honestly wild seeing how fast the alcohol business is declining as consumer behavior shifts wildly. With other options like legal cannabis and younger generations sticking with healthier options, alcohol consumption appears to be in structural decline. Some strong brewers like Constellation Brands can survive thanks to their scale, but niche players like Boston Beer have a lot more to prove moving forward. The market isn’t excited about all those doubts—so Boston Beer stock slumped over 10% in early trading.
[ fast casual ]
Cava Pushes Beyond IPO Highs with Stellar Earnings
Responsible growth is starting to compound
BREAKING NEWS
Despite an error that released preliminary earnings numbers 24 hours early, Cava reiterated their strong Q4 performance in their Q4 earnings call. Let’s explore why the stock has finally soared beyond their IPO highs.
WHAT HAPPENED
Cava has taken a slower approach to growth in order to keep costs in check during this current inflation meta. So the market was stunned when the fast-casual chain posted a 36% increase in revenue to $177 million in Q4. The Street was projecting that Cava would barely break even on their balance sheet—and the brand exceeded those expectations with a neat $2 million net income. Compared to last year’s $18 million loss—that’s a fine result for investors.
EXTRA HUMMUS
Cava isn’t letting their strong performance trick them into taking on unnecessary risks though. The brand has only projected a slight increase in the number of stores they intend to open in 2024 and a mild boost to their projected EBITDA this year. Cava has posted conservative guidance on every single one of their reports as a public company so far, and investors are starting to get wise to that game and overbuy the stock regardless.
WHY IT MATTERS
With their more efficient growth model proven, Cava has erupted past the initial heights of their 2023 IPO—jumping over 150%. The stock experienced a little pullback this morning after Cava management cooled investor expectations in their more detailed earnings call—but the stock is still up over 10% since the market began to digest these results.
Extra Moby Snacks
Disney is merging their Indian media business with Reliance Industries to create an $8.5 billion entertainment goliath in the world’s fastest-growing economy. Another slick move by Bob Iger as he fights to fend off activist pressure.
eBay managed to shock Wall Street with a huge outperformance during the holiday season. They also boosted 2024 guidance and raised their dividend. With the stock surging over 5%—is the e-commerce pioneer ready to dominate?
TOGETHER WITH
Today’s report is brought to you by Harvest Returns. Grow your wealth with passive investments in farming and agribusiness.