Beyond Meat (BYND - Free Report) reports its first quarterly financial report as a public company today after market close. Expectations are high with BYND illustrating prolific returns for investors since its IPO.
Beyond Meat has been the fairytale IPO story of the year. The stock had its initial public offering (IPO) on May 1st for a price of $25 a share, then opened up its shares the next day to the secondary market (stock exchanges) at $45 and closed that day at $65.75, up 163% in just one day of trading. Since then, BYND has rallied even more trading around $100 today, representing a 300% surge from its IPO price.
Below is a 1-month performance chart comparing BYND (blue), S&P 500 (red) and recent IPO UBER (green).
Analysts are exceedingly optimistic about the potential growth of BYND, with revenue estimates projecting 133% growth in 2019 and over 60% the subsequent year. Analysts are projecting positive EBITDA margins starting the second half of this year and profitability by 2021.
Millennials are now the largest consumer generation in the US, causing a significant shift in consumption patterns. Millennial consumers are increasingly health conscious with a growing number of studies illuminating the importance of “clean eating”. Millennials also have a renewed passion for sustainability and environmental change that influences their consumption.
Plant-based meat is ostensibly healthier and more environmentally friendly than eating animal meats. This is a growing trend in the US and across the globe that doesn’t appear to be slowing down. The question that we need to ask as investors is, why Beyond Meat? There are many other plant-based burgers out there, what gives Beyond Meat the competitive advantage over larger more connected players in the space?
The answer could be a combination of several factors. The largest one in my eyes is Beyond Meat’s ability to create a household brand that could become synonymous with plant-based meat. The ability to brand something so well that people immediately associate the product/industry with your firm is invaluable. Something that Uber (UBER - Free Report) , Kleenex (KMB - Free Report) , and Google (GOOGL - Free Report) all have been able to accomplish. Beyond Meat is one of the only pure-play firms in the business and the first to be put in the meat aisle. These factors, combined with its marketability, could thrust BYND into becoming an industry synonymous brand.
Beyond Meat’s plant-based products are attracting omnivores as a consumer base which is something a lot of other meat alternatives have been unable to do. According to Beyond Meat, 70% of their consumers are people who also consume meat. According to William Blair’s initiation of coverage report, taste is the biggest factor driving Beyond Meat’s brand loyalty.
1st Quarter Expectations
BYND is expected to report an EPS of -0.14 and revenues of $38.7 million. This first quarterly earnings report as a public company has a lot weighing on it. Investors will be looking to see if the profound growth figures that the market is pricing in can come to fruition. BYND is down roughly 3% going into earnings as investors brace for the report coming after market closes today. I don’t think this is indicative of anything other than earlier investors pulling profits before a potential outlook adjustment.
Watch for EBITDA margins closing in on profitability. Management guidance on this report and call are going to be extremely important. Listen to managements tone in the call to get a feel for whether they actually believe this extreme optimism is realistic or just a pipe dream.
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