Beyond Meat (BYND - Free Report) shares skyrocketed over 36% in morning trading Friday after the firm reported its first quarterly financial results as a public company after the closing bell Thursday. The plant-based meat firm stock is up well over 200% since its IPO and investors seem infatuated with Beyond Meat and its growth possibilities.
Let’s look at the firm’s quarterly results, outlook, and the larger picture to see if now is the time to buy Beyond Meat stock.
The Quick Pitch
Founded in 2009, Beyond Meat sells what it calls plant-based meat. The firm’s portfolio consists of burger patties, sausage (brats and hot Italian), and beef crumbles for pasta and tacos. The patties are made from four main ingredients: water, pea protein isolate, canola oil, and refined coconut oil. Unlike some vegetarian burgers, Beyond Meat aims to mimic the taste, consistency, and cooking profile of animal meat. And the reason is pretty simple: BYND sees its customers as meat eaters, not necessarily vegetarians or vegans.
The company’s ability to attract meat eaters to its plant-based offerings will be vital because only 5% of Americans say they are vegetarians, with vegans at 3%, according to a 2018 Gallup poll—nearly unchanged from 2012. Beyond Meat hopes to attract consumers to what it calls the “The Future of Protein,” based on larger, more humanitarian-esque goals. Part of the El Segundo, California-based company’s goal is to create a “better way to feed the planet,” according to its mission statement.
“By shifting from animal, to plant-based meat, we are creating one savory solution that solves four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare.”
Q1 Overview & Outlook
Beyond Meat lost roughly $30 million in 2018 on revenue of $87.9 million. With this in mind, the company’s Q1 fiscal 2019 revenue skyrocketed 215% to $40.2 million. This topped our Zacks Consensus Estimate that called for revenue of $38.66 million.
Meanwhile, the company reported an adjusted first-quarter loss of $0.14 per share, which matched our estimates but came in slightly worse than the year-ago period’s loss of $0.13 a share. Overall, the company reported a first quarter loss of $6.6 million, larger than the comparable period of 2018’s $5.7 million loss.
Looking ahead, management expects Beyond Meat revenues to exceed $210 million. This would mark at least 140% expansion from fiscal 2018 and comes in above our pre-release estimate of $205.5 million. The company didn’t provide 2019 earnings guidance, but projects it will post break-even Adjusted EBITDA.
As we mentioned at the top, shares of BYND soared in morning trading Friday, following a big after-hours jump Thursday. Beyond Meat surged nearly 40% to $137.10 per share, lifted by much larger than average trading volume.
Jumping back a bit, BYND stock opened its first day of trading on May 2 at $46 share. This marked an 84% climb above its actual IPO price, which signaled right away that demand for Beyond Meat was high. The stock skyrocketed 163% on its first day to close at $65.75 per share, which helped BYND stand out as one of the biggest first-day pops for a company raising more than $200 million since the height of the dot-com boom.
Shares are now up over 200% and the company boasts a market cap of $7.67 billion. The firm’s early success in the public markets helps it stand out compared to Uber (UBER - Free Report) and Lyft (LYFT - Free Report) . But can this run continue for a company that operates in a market that is still pretty unproven?
Beyond Meat is currently sold across roughly 30,000 grocery stores, restaurants, and food-service operations. The list includes Safeway, Publix, Kroger (KR - Free Report) , along with restaurants such as Carl’s Jr. and Del Taco. Buzz is growing for meatless burgers as more restaurants and fast food chains try to capitalize on what seems to be at least increased consumer curiosity.
The company will likely have to continue to convince people of its larger humanitarian and sustainability mission as the products themselves are not actually “healthier” than their traditional meat counterparts. There is a growing population of what is called flexitarian, or semi-vegetarians. With that said, plant-based fake meats currently represent a little more than 1% of the overall meat market, according to the Associated Press. Some analysts suggest that this figure could surge to 10%. Of course, this is just an educated guess, and even if the market explodes, it won’t just be Beyond Meat that benefits.
In 2018, Beyond Meat captured around 2% of the alternative meat market, according to research firm Euromonitor. Kellogg-owned MorningStar Farms grabbed the largest market share at 17%, with Kraft Heinz’s (KHC - Free Report) Boca brand at roughly 4%. BYND’s main rival, Impossible Foods—which could go public soon—has made its way into Burger King and many other restaurants. On top of that, traditional meat industry giants like Hormel Foods (HRL - Free Report) , Tyson Foods (TSN - Free Report) , Cargill, and others are reportedly set to roll out their own plant-based meat offerings sooner than later.
The race could be on at the moment to enter the meatless market. And it is not too hard to imagine the likes of Starbucks (SBUX - Free Report) , Yum Brands (YUM - Free Report) , and McDonald's (MCD - Free Report) selling some type of plant-based options to try to capture some of this early interest. Yet, the increased demand could be hard for companies like Beyond Meat to meet, which could cause problems.
Beyond Meat is currently a Zacks Rank #3 (Hold) that has already seen its stock price skyrocket. The company is clearly one that many on Wall Street have bet on early, but this insane run likely won’t last forever without at least some pullback. Still, investors might want to consider taking at least a small bite out of BYND stock at the moment.
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