The rising price of beef throughout the country may be the exact right reason to consider Tattooed Chef (NASDAQ:TTCF) stock.
But I understand that when it comes to TTCF stock timing is everything. If you were a shareholder at the beginning of 2021, you’re down more tham 24%.
However, I suspect some of those investors may have sold when the stock ticked above its closing price of Jan. 4 ($23) in early September.
If they did, it’s left a new crop of investors holding the bag, but the company may also be getting a new crop of customers. If that comes to pass, holding TTCF stock may be the right move for patient, long-term investors.
Interest in Plant-Based Food Is Taking Root
In 2020, the Earth Day Network and the Yale Program on Climate Change Communication published “Climate Change and the American Diet.”
One insight was that over half of the 1,034 American adults surveyed said they would be open to eating more plant-based foods if they knew what to buy.
That’s where a company like Tattooed Chef comes in. The company provides pre-packaged, plant-based entrees that make meal planning and preparation a snap.
The 8- to 12-ounce packages cost from $5 to $12. The company started out as an e-commerce play. And consumers can order the products from the company’s website.
That works for the true believers. However, the way for the company to reach its revenue and profit aspirations is to have its products seeded into grocery chains. A recent agreement with Publix is a step in the right direction. The company’s products can now be found in approximately 13,000 grocery stores throughout the United States.
That’s an important step, but now they have to get people to try. And that’s where a current opportunity may lie.
Could Trying Lead to Believing
If you believe that a key obstacle affecting the adoption of plant-based protein is consumer trial, then this may be your moment. A common, practical argument against plant-based meat is that it is more expensive than meat.
Prior to the supply chain disruption, plant-based entrees were sold at a significant premium to the competition. The reality for many consumers is that their desire to “eat healthy” has an inverse relationship to the cost of “healthy” food.
However, if you’ve been to the grocery store in the last six months, you know the price of everything is rising. In fact, in some cases the price of plant-based products may be lower than their competition.
In theory, this creates a path to entry for individuals who are open-minded to a plant-based diet but were put off by the price.
On the other hand, with an increasing number of individuals choosing to work from home, I wonder how the company’s convenience narrative will play out. If consumers have more time to eat at home, they may decide they have more time for meal preparation.
The biggest reason why some investors are staying away is that Tattooed Chef appears to be several years away from profitability.
Margins are going down even as revenue is increasing. The company maintains that its growth through acquisition strategy will lead to scalability, and then profitability. It will need to, otherwise the company will have to raise more capital in a couple of years.
TTCF Is a Buy, But Keep Some Powder Dry
I understand and respect the argument that the Tattooed Chef’s bottom line is not what investors would like it to be. However, this is a unique moment and that may call for unique investment strategies.
On an increasing basis, consumers at least give lip service to the idea of plant-based diets. If that consideration turns into purchase intention, TTCF stock should reward patient investors, but this won’t be a fast process.
For one thing, short interest remains high at more than 26% at the time of this writing. Yes, it’s down since being more than 30% in June, but that also implies that retail investors may be looking at the stock as a short squeeze opportunity.
The company is not likely to be profitable for a couple of years, so this isn’t a time or a stock to go “all in” on at this time. If you believe in the long-term future of plant-based food, then buying a little TTCF stock now and adding to it as time goes by may be a worthwhile strategy.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
