Speculative growth stocks might be viewed as uneasy investments going into 2023 with inflationary concerns crushing these companies in 2022. Still, the risk to reward could be favorable when such stocks are near their 52-week lows.
Two popular growth names trading near their lows are Lyft
LYFT
and Beyond Meat
BYND
. Let’s see if they will be viable investments for 2023 and beyond.
Overview
Both Lyft and Beyond Meat went public during the first half of 2019. Lyft primarily operates as a ridesharing service with multimodal transportation networks in the United States and Canada. Unlike its major competitor Uber Technologies
UBER
, Lyft has chosen to stick with its core ride-hailing business.
Lyft now trades at just $10 per share and 85% beneath its IPO price of $72 a share. Despite a clearer road to profitability Lyft also trades below Uber stock at the moment with UBER shares at $25.
Beyond Meat doesn’t have such a popular nemesis in its bid to expand its manufacturing, marketing, and distribution of plant-based meats. Beyond Meats sells its plant-based, vegan meats in the U.S. and internationally.
BYND began trading at $25 per share and popped to over $65 a share on the first day of trading. Beyond Meats stock now trades around $13 per share as the excitement for its alternative meat faded over the last year.
Despite the setbacks, this year’s massive drop in Lyft and Beyond Meat stock may be intriguing to many investors.
Performance & Valuation
Lyft is down -75% in 2022 vs. Beyond Meat’s -79% with both severely underperforming the S&P 500’s -21%. Over the last three years, both stocks are down over 80% since they began trading to underperform the benchmark’s 30% climb.
Image Source: Zacks Investment Research
Lyft’s high earlier in the year was $46.64 per share and Beyond Meat saw a high of $74 a share. LYFT and BYND are now 78% and 82% below their 52-week highs, respectively.
Since both companies aren’t profitable at the moment, we are unable to use the traditional price-to-earnings valuation metric. Even so, taking a look at their price to sales helps make sure a high premium is not being paid for these stocks, especially without profitability.
Image Source: Zacks Investment Research
We can see from the above chart that LYFT and BYND’s P/S are at the optimum level of less than 2X. Lyft’s 0.92X has the edge and is also nicely below its industry average of 1.2X. BYND trades above the Food-Meat Products industry average of 0.47X but at a much more realistic level than its high of 64.4X and the median of 14.2X over the last three years.
Balance Sheet
Monitoring the balance sheet of speculative growth stocks is crucial. In this regard, Lyft and Beyond Meat do pass the solvency test having more assets than liabilities, but not by a wide margin.
Lyft has over $2 billion in cash and equivalents with its total assets of $4.77 billion coming in higher than its total liabilities of $3.38 billion.
As for Beyond Meat, the company has $733 million in cash and equivalents with $1.37 billion in total assets which is slightly above its total liabilities of $1.24 billion.
Growth
Lyft earnings are now expected to decline -28% in 2022 at -$0.32 per share compared to an adjusted loss of -$0.25 a share in 2021. However, Fiscal 2023 earnings are expected to rebound and be in the black at $0.54 per share. It is important to note that earnings estimate revisions are down for both FY22 and FY23 over the last 60 days.
Image Source: Zacks Investment Research
On the top line, sales are projected to climb 27% this year and jump another 19% in FY23 at $4.86 billion. FY23 would represent 34% growth from pre-pandemic levels with 2019 sales at $3.61 billion.
Pivoting to Beyond Meat, earnings are now expected to drop -100% this year at -$5.74 per share compared to -$2.87 a share in 2021. Fiscal 2023 earnings are projected to stabilize but still reflect a loss of -$3.65 per share. Earnings estimates have gone down for BYND over the last quarter.
Sales are forecasted to decline -10% in FY22 but rise 3% in FY23 to $428.29 million. Fiscal 2023 would be a 43% increase from pre-pandemic levels with 2019 sales at $298 million.
Bottom Line
Lyft and Beyond Meat stock both land a Zacks Rank #3 (Hold). Although earnings estimates have trended down for both stocks over the last quarter, their long-term top line growth is still intriguing. This could help them continue down the road to profitability as they adjust to operating costs and a challenging economy.
One thing is for sure, the risk to reward is a lot more favorable to invest in Lyft and Beyond Meat going into 2023 after their steep declines this year. When looking at their highs earlier in the year both stocks may be viable investments when concerns in the broader economy start to subside and more investors feel comfortable about investing in the future of ride-hailing and alternative plant-based foods.
The average Zacks Price Target suggests 18% upside for BYND stock and 140% upside for Lyft shares. This is certainly intriguing with both stocks trading under $15 a share at the moment.
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