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Here’s Why Now’s the Time to Buy Beyond Meat Stock

The recent plunge in BYND stock offers an attractive entry point into a long-term winner

Plant-based meat manufacturer Beyond Meat (NASDAQ:BYND) has had a wild ride as a public company. The company’s IPO in early May 2019 was a smashing success, with Beyond Meat stock soaring from a $25 IPO price, to a $240 price tag by late July, as the plant-based meat movement gained tremendous momentum.

Here's Why Now's the Time to Buy Beyond Meat Stock
Source: calimedia / Shutterstock.com

Then, a few headwinds hit, including a secondary offering and the lock-up expiration. Despite continued strong quarterly numbers, those headwinds created a perfect storm which has since caused BYND stock to plunge below $80.

Many investors out there are writing off Beyond Meat stock as just another “pump-and-dump” IPO stock that will continue to suffer from overvaluation and too much hype. But, I think that analysis is both antiquated and unnecessarily short-sighted.

Hype, From Too Much to Too Little

Yes, Beyond Meat stock was overvalued at $240. It was over-hyped back then. But, now that shares have lost two-thirds of their value since then without any material change to the fundamentals, shares are no longer overvalued. Indeed, if you look at the big picture, one could reasonably argue that there is now too little hype surrounding Beyond Meat. Plus, there are multiple catalysts on the horizon which could easily propel shares meaningfully higher in 2020.

The big picture? Now isn’t the time to run away from Beyond Meat stock. Instead, now is the time to buy BYND stock. This one is going higher in 2020, and far — umm, sorry — beyond over the next decade.

Beyond Meat Stock is Undervalued

Given the company’s long-term growth prospects, Beyond Meat stock is undervalued below $80.

The story is easy to follow. Plant-based meat is the next big thing in the food world. Everyone and their best friend is shifting to plant-based diets for a variety of reasons, ranging from animal welfare, to ecological sensitivity, to health benefits. This shift has already played out in a big way in the dairy world, where plant-based products constitute well over 10% share of dairy products (and still rapidly growing). This shift is in the first few innings of playing out in the far bigger meats world, where plant-based products presently constitute less than 1% share globally.

Over the next few years, plant-based penetration in the global meats market will steadily climb toward 10%, and potentially higher. As it does, the companies which have become the most-recognizable brands in the space — Beyond Meat and Impossible Foods — will grow by leaps and bounds. Sure, there will be a ton of competition. But, Beyond Meat doesn’t need to nab a huge share of this market in order for shares to be worth more than $80 today.

The global meats market should measure $1.5 trillion by 2030. Plant-based meat substitutes will measure 10% of that, or $150 billion. Beyond Meat should reasonably nab 5% share, implying $7.5 billion in revenue. Gross margins are stable at 35%. The opex rate should drop towards 10% with scale. Putting all that together, Beyond Meat could hit $15 in earnings per share by 2030.

Based on a packaged foods sector-average 17.5 times forward multiple and a 10% annual discount rate, that equates to a 2019 price target for Beyond Meat stock of over $100.

Multiple Catalysts on the Horizon

Not only is Beyond Meat stock undervalued here and now, but there are also multiple catalysts on the horizon which could propel shares back above $100 soon.

First, there’s potential for McDonald’s (NYSE:MCD) to, at any moment, announce a nationwide roll-out of a Beyond Burger. Right now, McDonald’s is testing out Beyond products in a few locations. Given how other retail roll-outs of Beyond have gone, it is quite likely that McDonald’s Beyond test has gone very well. As such, it is also quite likely that McDonald’s announced a nationwide roll-out of Beyond products fairly soon. Such an announcement could provide a huge lift to BYND stock.

Second, fourth quarter earnings — due in January 2020 — should be really good. The Beyond Meat growth narrative hasn’t lost any steam over the past few months. If anything, it’s gained momentum, despite the share price erosion. For example, the Los Angeles Lakers — the most-widely followed and talked about team in the NBA — just partnered with Beyond Meat. Taco Del Mar is rolling out Beyond tacos across its entire store base. And, Dunkin’ Brands (NYSE:DNKN) just rolled out Beyond products across the nation.

Third, Beyond is looking to expand internationally in a big way in 2020. Specifically, the company is pushing more aggressively into Canada, and is looking to enter the Asia market in 2020. This international expansion will add more firepower to what is already super-charged growth narrative. More firepower will help propel a rebound in BYND stock in 2020.

Bottom Line on BYND Stock

BNYD stock is a long-term winner that, a few months ago, was over-valued and over-hyped. Since then, shares have lost more than two-thirds of their value. But, the growth narrative has only gained momentum during this stretch. This combination implies that what you have with Beyond Meat stock now, is a long-term winner trading at an attractive discount.

As of this writing, Luke Lango was long BYND. 


Article printed from InvestorPlace Media, https://investorplace.com/2019/12/heres-why-nows-the-time-to-buy-beyond-meat-stock/.

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