The rally in Beyond Meat shares (NASDAQ 🙂 does not seem to show any sign of a peak. The most successful IPO of 2019, the producer of plant-based "meat", continues its upward march and proves that many no-sayers are wrong.
The last rise in stock prices came when Eldrundo, California-based maker of plant-based hamburgers debuted last week, crushing analyst expectations and giving upbeat for 2019. Stocks rose by more than 39% on Friday day after the company told investors that it could even break through this year as more and more restaurants and supermarket chains are buying meatless products such as burger patties and sausages.
Before the Friday rally, Beyond Meat had already jumped about 300% of its $ 25 a share IPO prize. It closed at $ 138.65 on Friday and rose again 21% to $ 168.10 yesterday. Let's take a closer look at their quarterly figures and try to understand this remarkable run in their stock prices.
Beyond Meat Break-Even comes sooner
The 10-year-old company gains traction much faster than many analysts had expected. The quarterly revenue more than tripled in its first financial report since it became public on May 2. The company's revenue climbed to $ 40.2 million for the quarter ending March 30, compared to $ 12.8 million for the previous year.
Beyond Meat reported a net loss of $ 6.6 million, or $ 0.95 per share, versus a loss of $ 5.7 million for the first quarter of 2018. Analysts expected revenues of $ 38.9 million and a net loss of $ 6.7 million for the quarter, according to FactSet.
Although the company continued to lose money, management now expects it to remain in 2019 equal to the adjusted EBITDA that takes into account interest payments, taxes and some other factors. Turnover for the year is likely to increase by 140% over last year, more than $ 210 million.
"We believe our strong financial results for the first quarter show the need for mainstream consumers for vegetable meat products in the United States and beyond," said Ethan Brown, President and Chief Executive Officer of Beyond Meat, in the income statement. . "Our team continued to scale up our activities in both retail and food service, as we benefited from broad growth in the first quarter."
With this positive management standard, there are good reasons for investors to feel excited. In the past 18 months, Beyond Meat has entered into agreements to supply hamburgers to chains, including TGI Friday's, Del Taco Restaurants Inc. and Carl & # 39; s Jr., the civilian chain of CKE Restaurant Holdings Inc. Tim Horton & # 39; s, the Canadian breakfast spot, is also testing breakfast sandwiches that contain Beyond Meat products.
Beyond Meat products have also been popular in more than 11,000 American supermarkets, where burgers and sausages from citizens occupy the shelf space where regular customers are looking for their meat.
The company's growing turnover suggests that meat consumers in the United States are probably the company's customers
Lofty Valuations and Upcoming Competition
But Beyond Meat's dazzling demonstration also raises questions in the minds of cautious investors trying to justify these lofty valuations. After Friday's 39% increase, the market valuation of faux meat suppliers is approaching nearly $ 8 billion, bringing it into the league of established food companies with billions of dollars in revenue.
To provide a context, Tyson Foods (NYSE :), the largest US meat producer, has a market capitalization of $ 30 billion with $ 43 billion in expected sales for the current fiscal year. Before last week's earnings report, Beyond Meat noted on the enterprise-to-12-month-forward-sales multiple of 19 – a huge premium compared to other packaged food companies trading low low-digit ratings.
Of course these comparisons make no sense if we are dealing with a fast-growing company such as Beyond Meat, but investors must take into account the threats that can harm this very ambitious growth scenario.
After seeing the success of Beyond Meat, for example, a few large players are just getting ready to enter the vegetable food market. Nestle SA (SIX 🙂 has already announced that the factory-based Awesome Burger will debut in the US later this year. Tyson – a one-time investor in Beyond Meat – is also planning to introduce its vegetable product later this year.
Bryan Spillane, analyst at Bank of America, wrote in a research note that the extrusion process used to produce Beyond Meat products is fairly common in making other packaged food, keeping the entry barriers fairly low for other aspirants , especially large food giants.
According to the same analysis, quoted by a Bloomberg report, the higher price for Beyond Meat citizens could set a ceiling for future growth. The average selling price of Beyond Meat burgers is $ 12 per pound, compared to $ 4 per pound for regular pasties.
Bottom Line
Beyond Meat has attracted the attention of a market that was left open by the major food companies. But that space is about to become even busier, with many established players joining the battle in the next 12 months.
We do not believe that Beyond Meat has a large economic fortress to defend its terrain once the competition has heated up. Investors who have committed a murder in this trade should shorten their positions and book profit. Those on the sidelines have to wait for a better access point.
