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Why Beyond Meat Could Offer Beefy Returns in 2020

Alternative meat company, Beyond Meat (NASDAQ:BYND) has had its share of good news lately. It has made major deals with the likes of McDonald’s (NYSE:MCD), where sales could reach more than 300%, as highlighted by Bernstein analyst Alexia Howard.

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The meatless meat trend overall is gaining momentum. Even Starbucks’ (NASDAQ:SBUX) CEO Kevin Johnson made a commitment to increase plant-based options for a “more environmentally friendly menu.” Restaurant Brands Internationals’s (NYSE:QSR) Burger King, White Castle, Dunkin (NASDAQ:DNKN) and even Disney (NYSE:DIS) Parks added plant-based options, too.

Then Denny’s announced it’ll be offering Beyond Meat burgers in 1,700 locations across the U.S. and Canada. Yum! Brands’ (NYSE:YUM) KFC revealed it’ll test the Beyond Fried Chicken. Subway is testing the Meatball Marina. The best part — I think it’s only a matter of time before we hear of more.

With Americans changing their diets, retailers flocking to the opportunity, and the potential for big revenue growth, I believe BYND could trade closer to $160.

There’s Big Demand for Meat Alternatives

Right now, 55% of Americans trying to add more plant-based foods.

Better, sales of meat alternatives have rocketed from $118.7 million in 2017 to $192.1 million in 2019, as highlighted by NBC News’ contributor Martha C. White.

In addition, NPD found that 16 percent of Americans say they ‘regularly’ use plant-based alternatives to meat and dairy products, such as almond milk and meat substitutes. More unexpected, though, is that 89 percent of the people eating all of these tell NPD that they’re not vegetarian or vegan — they just like variety in their diets.”

Beyond Meat Seeing Healthy Returns

Granted, BYND is facing big competition from the likes of Tyson Foods (NYSE:TSN), Kraft Heinz (NASDAQ:KHC) and Conagra Brands (NYSE:CAG).

But it’s tough to ignore Beyond Meat’s first-mover advantage. Plus, demand has already translated into healthy quarterly profits for Beyond Meat, as well. Third-quarter net revenues of $92 million was far better than expectations for $82.2 million. EPS of six cents was double the three cents expected.

The company also raised its full-year revenue outlook to a range of $265 million to $275 million, which is far better than earlier estimates for $240 million.

Analysts at Bernstein are also getting bullish thanks to McDonald’s. “By taking a bottom-up approach, we assume 45-55 patties/store/day at ($1-$1.10) per patty, which is higher than the (about) 28 Impossible Whoppers sold at Burger King per store per day given MCD’s greater scale and substantially higher sales velocity,” Bernstein said. “On this basis, we estimate that BYND could generate ($227 million to $306 million in) incremental sales from a potential MCD rollout in the U.S.”

We’ll have a better idea of what’s going on behind the scenes when Beyond Meat posts Q4 2019 earnings on Feb. 27, 2020 after market close.

The Bottom Line on BYND Stock

Granted, there are competitive threats. However, with strong consumer demand, food retailers lining up to offer plant-based alternatives and the potential for solid long-term growth, I’m bullish on Beyond Meat stock and believe we could see a near-term test of $160 a share.

As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.

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