Shares of plant-based meat maker Beyond Meat (NASDAQ:BYND) popped in early May after the company reported strong first quarter numbers that broadly underscored that the global consumption pivot towards alternative meat remains robust, even amid the novel coronavirus pandemic. The company also scored a surprise profit in the quarter, which pleased investors.

In sum, Beyond Meat’s earnings were good enough to send BYND stock up 20% to its highest levels since February. Year to date, the stock is now up nearly 60%. To put that in perspective, the S&P 500 is down more than 10% in 2020.

Is it time to fade the rally? Or will Beyond Meat keep outperforming?

I think it’s the latter. And my thoughts are backed by four big reasons:

1. Beyond Meat’s strong earnings emphasize that the plant-based meat growth narrative is only gaining momentum, and that the company is extending its leadership position in the market.
2. Gross margins are improving rapidly and dramatically, paving the path for huge profit potential at scale.
3. Certain catalysts, such as aggressive expansion in China and a rebound in the foodservice channel, could spark supercharged growth in the second-half of 2020.
4. The fundamentals imply that BYND stock can and will run above $300 within the decade (and maybe even higher).

Beyond Meat’s Strong Earnings

Beyond Meat’s first quarter earnings report was strong, and broadly underscored the long-term bull thesis underpinning BYND stock.

In short, that long-term bull thesis is that an increasing number of socially and environmentally conscious consumers are increasingly choosing socially and environmentally positive products and services. Think electric cars and Tesla (NASDAQ:TSLA). Or clean energy and Enphase Energy (NASDAQ:ENPH). Or, yes, plant-based meat and Beyond Meat.

By aligning itself with this massive consumption pivot, Beyond Meat has guaranteed itself rising demand for the foreseeable future. More than that, Beyond Meat is the “Tesla of plant-based meat” in that the company is the undisputed leader and face of the market.

Beyond Meat’s earnings underscored that all of this rings true today.

Even amid a global economic shutdown, Beyond Meat’s retail revenues rose 185% year-over-year, paced by 150% domestic growth and 100% international growth. Foodservice revenues rose 100%, too, despite many restaurants across the world closing their doors in March.

In other words, Beyond Meat sustained red-hot growth, even at a time when consumer spending fell off a cliff. Further, Beyond Meat’s market share in U.S. retail rose 770 basis points in the quarter, with Beyond accounting for the top four best-selling SKUs in the whole plant-based meat category and the company outpacing its closest competitor in terms of sales growth by a factor of roughly six-times.

Zooming out, the long-term bull thesis remains intact. The plant-based meat growth narrative remains robust. Beyond Meat continues to dominate that market. So long as those two things remain true, BYND stock has a bright future.

Improving Margins

Arguably just as notable as Beyond Meat’s sustained robust demand trends in the first quarter were Beyond Meat’s soaring profit margins.

Specifically, gross profit margins in the first quarter rose 12 points year-over-year and 5 points sequentially to nearly 39%. On a trailing twelve month basis, gross margins are now at 36%, up more than 200 basis points from where they were just three months ago.

A 35%-plus gross margin for Beyond Meat is a big number. Most meat companies — like Tyson (NYSE:TSN) — operate around 11% to 12% gross margins, with around a 5% operating expense rate, for operating profit margins in the 5% range.

Beyond Meat’s gross margins are above 35%. It appears they are on track to hit 40% in the long run. If so, and if Beyond can leverage scale to drive its expense rate down to more normal near-10% levels, then you’re talking about a company that could potentially operate at 25%-plus operating margins at scale — or about five-fold that of Tyson.

Big picture: thanks to huge and rising gross margins, Beyond Meat has huge profit production potential in the long run, more-so than has ever been seen before out of a meat company.

Catalysts on the Horizon

Beyond Meat has two huge catalysts on the horizon which could spark a growth surge in the back-half of 2020.

First, the relatively depressed foodservice channel could rebound.

McDonald’s (NYSE:MCD) and Starbucks (NASDAQ:SBUX) are among a handful of restaurants which have hinted that retail food traffic trends have started to improve over the past few weeks, after a disastrous drop-off in March. Traffic trends will continue to improve in May and throughout the summer, as economies across the globe gradually re-open and consumers regain confidence. As that happens, Beyond Meat’s foodservice business will rebound in the second quarter, and once again turn into a growth engine by the second-half of 2020.

Second, Beyond Meat could start to see explosive growth in China.

The company is going to launch Beyond Beef items at Starbucks locations in China soon. Beyond Meat has also finalized a distribution agreement with a leading local distributor in China, Sinodis, which should “unlock a network of distribution opportunities across retail and foodservice,” according to management. To assist those expansion efforts, Beyond has created branded Weibo (NASDAQ:WB) and WeChat accounts in order to engage with the Chinese consumer through the all-important digital media channel.

Big picture: Beyond Meat is putting all the pieces in place today, for explosive Chinese market growth tomorrow.

Big Upside for BYND Stock

My numbers continue to suggest that BYND stock has big upside potential in the long run.

Given that Beyond Meat is weathering the coronavirus storm with impressive resiliency and that plant-based meat demand trends remain robust, I haven’t made any adjustments to my long-term revenue model for Beyond Meat. That model continues to assume $7.5 billion in sales for the company by 2030, based on a $1.5 trillion global meats market, a $150 billion plant-based meat market (10% penetration) and 5% market share for Beyond.

I have, however, made upward adjustments to my margin estimates. I previously believed Beyond Meat to be a 35% gross margin player at scale. Those estimates now seem antiquated, with gross margins already above 35% on less than $100 million in sales. Increased scale and sustained demand will drive gross margins higher over time. I now estimate that gross margins will settle around 40% by 2030.

Assuming so, my 2030 earnings-per-share estimate for Beyond Meat has been raised to $16.50, from $15 prior. Based on a consumer staples sector-average 20-times forward multiple, that implies a new long-term price target for BYND stock of $330.

The Bottom Line on Beyond Meat

Beyond Meat’s earnings were good, and broadly underscore that this company is a long-term winner. In the stock market, the key with long-term winners is to own them when the price is right.

Today, the price on BYND stock is right. If you discount back the 2030 $300 price target back by 10% per year, you arrive at a 2020 price target for BYND stock of $140. Thus, I say stick with the 2020 rally in BYND stock up to $140, implying another 20% or so upside from current levels.