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Buy IPO Star Beyond Meat Before Q2 Earnings with BYND Stock At New Highs?

Benjamin Rains

Shares of Beyond Meat BYND surged to yet another brand new all-time high Friday morning. This means investors might expect big things from the plant-based meat firm’s Q2 earnings results, which are due out after the closing bell on Monday, July 29.

BYND stock has been the hottest IPO in 2019, leaving Uber UBER and Lyft LYFT in the dust. The question is should investors take a bite of Beyond Meat stock as it continues to capture the interest of Wall Street, consumers, restaurants, and food distributors?

What BYND Does

Beyond Meat, which was founded in 2009, sells so-called plant-based meats that unlike veggie-based meat substitutes, aim to mimic the taste and consistency of their “real” meat rivals. The firm’s portfolio consists of burger patties, sausage (brats and hot Italian), and beef crumbles for pasta and tacos. The patties are made from four main ingredients: water, pea protein isolate, canola oil, and refined coconut oil.

BYND sees its customers as meat eaters and flexitarians. This is a key point because only 5% of Americans identify as vegetarians, with vegans at 3%, according to a 2018 Gallup poll—nearly unchanged from 2012. The El Segundo, California-based firm hopes it will become a household name in what it refers to as “The Future of Protein,” with the aim to create a “better way to feed the planet.”

Beyond Meat boasts that its plant-based meats are healthier than its traditional meat counterparts, but these claims have been disputed. Therefore, it seems that Beyond Meat’s long-term success will likely be determined by its much larger goals. “By shifting from animal, to plant-based meat, we are creating one savory solution that solves four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare.”

 

 

 

Recent News & Competition

On Wednesday, Dunkin’ DNKN announced that it would become the “first U.S. restaurant chain to serve 100% plant-based Beyond Breakfast Sausage.” The Beyond Sausage Breakfast Sandwich will be available at participating Dunkin' restaurants in Manhattan, with a national rollout expected down the road. Earlier this month, Blue Apron APRN said it will add BYND’s plant-based offerings to its meal kits in August.

Overall, Beyond Meat is currently sold across roughly 30,000 grocery stores, restaurants, and food-service operations. The list includes Safeway, Publix, Kroger KR, along with restaurants such as Carl’s Jr. and Del Taco. BYND reportedly grabbed roughly 2% of the alternative meat market in 2018. Plus, Barclays analysts projected that the market for alternative meat might hit $140 billion over the next decade, which would see it grab roughly 10% of the $1.4 trillion global meat market.

Other estimates are less optimistic, and the company will face competition from much larger food industry powers. Companies such as Hormel Foods HRL, Tyson Foods TSN, Cargill, and others are reportedly set to roll out their own plant-based meat offerings. Meanwhile, Kellogg-owned MorningStar Farms and Kraft Heinz’s KHC Boca brands are already on the market. And offerings from BYND’s plant-based meat rival, Impossible Foods, can be found in Burger King and other restaurants.

Outlook

Beyond Meat is projected to post Q2 revenue of $50.94 million, based on our current Zacks Consensus Estimate. We don’t have a year-ago figure to compare this against, but it would mark a nearly $11 million, or 26% improvement against Q1’s revenue—which the firm said skyrocketed 215% and topped our estimate.

The company’s full-year fiscal 2019 revenue is projected to jump 150% from $87.9 million in the year-ago period to $219.45 million. Peeking further down the road, BYND’s fiscal 2020 revenue is expected to climb 56% higher than our current-year estimate to reach $341.78 million.

At the bottom end of the income statement, the company is projected to report an adjusted Q2 loss of $0.08 per share. This would top Beyond Meat’s loss of $0.14 a share in the first quarter. Last year, Beyond Meat lost roughly $30 million and it is expected to post an adjusted fiscal 2019 loss of $0.26 per share. However, the plant-based meat firm is expected to report EPS of +$0.03 in 2020.   

Bottom Line

The company currently boasts a market cap of $14.03 billion, and BYND stock hit a new all-time high of $239.71 a share in morning trading Friday. Shares of Beyond Meat have now soared over 52% in July alone as part of its insane climb since its opening day price of $46 on May 2.

Beyond Meat is currently a Zacks Rank #3 (Hold) that has seen its stock price soar, with few hiccups in its first three months as a public company. Therefore, there could easily be a pullback following its second-quarter earnings release, no matter how impressive the results or guidance might be, as investors try to realize some of their outsized returns.

In the end, BYND stock looks like it is worth nibbling on as part of a growth-focused, homerun-style portion of a portfolio. But there is still a ton of uncertainty when it comes to Beyond Meat’s longer-term success within this nascent plant-based meat market.

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