Beyond Meat (NASDAQ:BYND) stock has turned into a battleground stock of sorts over the past year. Bulls argue that Beyond Meat stock is the emerging Tesla (NASDAQ:TSLA) of a soon-to-be-huge plant-based meat market. Bears say it’s a no-moat company at the forefront of a plant-based meat fad that will pass.
Thus far, bulls have won out. BYND stock is up 500% from its May 2019 IPO price.
Going forward, bulls will keep winning.
There are three simple realities here:
- Plant-based meat is the future of meats consumption.
- Beyond Meat is the Tesla of plant-based meat.
- BYND stock is on a winning path to a $500 price tag over the next decade.
Net net, the big picture couldn’t be any clearer. Buy BYND stock on weakness. Hold it for the long haul as the company disrupts the way we eat.
Plant Meat Is the Future
Central to the bull thesis on BYND stock is that plant-based meat is the future of meats consumption.
Why is that so?
Because plant-based meat is currently and/or will soon be logically superior to animal-based meat in every single way. Simply consider:
- Plant-based meat is better for animals. It’s no hidden secret that in order to meet the world’s burgeoning meat demand, farmers have had to breed more cows, chickens and pigs than is normal, and stuff them into hardly livable conditions. For years, Americans didn’t care about the welfare of livestock. Now, for various reasons, they do. Plant-based meat improves animal welfare by reducing the need for so many cows, chickens and pigs.
- Plant-based meat is better for the environment. It’s also no hidden secret that an overpopulation of livestock is bad for the environment. Cows produce more greenhouse gases than cars, and are responsible for 9% of all human-induced greenhouse gases. More robust plant-based meat adoption will reduce the number of cows in the world, and thereby, reduce carbon emissions and actually be a powerful tool in combatting climate change.
- Plant-based meat production, at scale, is far cheaper. Today, making plant-based meat is quite expensive, because of huge R&D spend. But, that R&D spend will fall as companies perfect their lab meat production processes, and as those processes benefit from economies of scale. Indeed, at scale, plant-based meat production will be far cheaper than animal-based meat production, because the former is a repeatable process with cheap ingredients that can be performed continuouslyin a single lab, while the latter requires upkeep and maintenance of a huge farm with thousands of cows, chickens and pigs.
- Plant-based meat will inevitably be healthier than animal-based meat. One of the biggest knocks against plant-based meat today is that it’s not that healthy. That’s true. Current plant meat products stuff a bunch of weird stuff in them to make the product have similar taste and texture to animal meat. But the science here will only get better as plant meat demand surges. And, as that science gets better, plant meat products will only get healthier and healthier. Meanwhile, animal meat won’t get any healthier. At some point in the not-too-distant future, then, plant meat will become significantly and permanently healthier than all animal meat.
All in all, the writing is on the wall. For a myriad of reasons, plant-based meat is the undeniable future of meat consumption.
Beyond Meat Is the Tesla of Plant Meat
Plant-based meat is today, where electric vehicles were about a decade ago in terms of mainstream global disruption. That is, plant meat is at an inflection point of going from niche to globally ubiquitous.
Extending that analogy further, Beyond Meat is the unrivaled leader of the plant meat megatrend, and in many ways, is the Tesla of this space.
Beyond Meat’s unrivaled leadership comes down to a few things.
First, the company has huge technological advantages. Making plant-based meat isn’t easy, and Beyond Meat is much better at it than others in the space, as shown by its 50% repeat-purchase rate. The company has many more products than other plant-meat makers, including plant burgers, plant sausages, plant pork, etc.
Second, Beyond Meat has distribution advantages. Beyond Meat is already in 118,000 retail and food-service outlets, and has signed big deals with McDonald’s (NYSE:MCD), Starbucks (NASDAQ:SBUX), Yum (NYSE:YUM) … and many, many more. That number is also growing by ~20% every quarter. So, by the time other players enter this space, Beyond Meat will already be everywhere — and in many of those places (like fast food chains) Beyond Meat will have exclusive deals in place.
Third, the company has a branding advantage. Beyond Meat has become the brand for plant-based meat in many consumers’ minds, mostly because of its broad distribution channels. So, if a first-time entrant into the plant-based market is looking for something to buy at a grocery store, they will almost certainly start off with a Beyond Meat product.
In other words, much as Tesla leaned into technology, distribution, and branding advantages to stay at the forefront of the burgeoning EV market, Beyond Meat will leverage technology, distribution, and branding advantages to stay at the forefront of the burgeoning plant meat market.
Of course, that’s great news for BYND stock.
Beyond Meat Stock to $500?
By my numbers, Beyond Meat’s stock — even at today’s elevated levels — still has compelling long-term upside potential.
You have to remember, the global meats market that Beyond Meat is aggressively disrupting measures $1.4 trillion. On the meat production side of the market, it’s essentially an oligopoly ruled by five major players, all of whom do $15+ billion in annual sales.
Make no mistake. Beyond Meat will be that big one day. The plant-based meat megatrend is simply too big and too powerful — and Beyond Meat too far ahead of competitors — for the company not to be a $15+ billion revenue company one day.
Simultaneously, because plant-based meat production is cheaper than animal-based meat production, Beyond Meat operates at significantly higher margins than traditional meat producers. Tyson’s gross margins hover just north of 10%. Beyond Meat’s gross margins are marching towards 40%.
Assuming economies of scale will help drive Beyond Meat’s opex rate down to a more normal 20% rate, then Beyond Meat one day projects as a $15+ billion company with 20% operating margins. That growth profile implies that $2+ billion in net profits is totally doable in the long run.
A simple 20X multiple on that implies a potential future valuation for Beyond Meat of $40+ billion. Assuming some share dilution over the next decade, that should round out to a BYND stock price of about $500.
Bottom Line on Beyond Meat Stock
The bull thesis on BYND stock is shockingly simple.
Plant meat is going to take over the world. Beyond Meat is the unrivaled leader with a big moat in the plant meat sector. This company has potential to be worth $40+ billion one day. It’s worth less than $10 billion today.
Add it all up, and the implication is to treat BYND stock like a buy-on-dips, hold-for-the-long-haul type of stock.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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