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Buy These 2 Stocks in 2023 and Hold for the Next Decade, 2 Growth Stocks to Buy Before the Big Bull Rally, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. Beyond Meat has been working with them since February 2019. You can see all the adjustments made to Beyond Meats balance sheethere. Not knowing what is in the hot dog, not knowing where the hot dog came from, the conditions of the animals at the house in which the meat was slaughtered. Lots of small companies have also emerged and targeted the same audience, such as Purple Carrot or Sunfed Meats. At its TTM FCF burn rate, the firm has enough cash to operate for just over 16 months before needing additional capital. Beyond Meat had originally been sold in retail shops across the USA, then worldwide. Furthermore, Don Lee alleged significant concerns about food safety protocols concerning the raw materials that Beyond Meat sent. After adjusting for this liability, I can model multiple purchase price scenarios. This is rather than Beyond Meat actually creating a meat brand that is real meat. This is very rare: imagine if menus displayed all the product brands they use to cook the dishes you eat. This would, in turn, take BYNDs market cap to about $14 billion by 2023, from $9.6 billion currently. This is a major strength: a high speed-to-market. Over 2Q20, Beyond Meat removed $1.5 million (1% of revenue) in other expenses when calculating adjusted EBITDA. Beyond Meat is seeking a marketing, advertising, regulatory, and trademark attorney with 10-12 years of experience. Beyond Meat's marketing strategy is to convert carnivores into occasional vegans. Although its products are plant based Beyond Meats marketing does not explicitly call that out. February 1, 2022 . This indicates an extremely successful uptake by consumers. One of the most important pieces of furniture we own. If you think about the first time you heard about Beyond Meat it very well many have been when the product launched at a large fast food chain. Additionally, the companys new partnerships will also drive impressive top line growth. (Photo Illustration by Drew Angerer/Getty Images). This adjustment represents 7% of Beyond Meats market cap. As of 2020, the Beyond Meat company sells: Cookout Classic (10 plant-based burgers). By 2015, even Walmart was selling Beyond Meats plant-based products! As investorsfocus moreon fundamental research, research automation technology is needed to analyze all the critical financialdetails in financial filingsas shown in the Harvard Business School and MIT Sloan paper,Core Earnings: New Data and Evidence. this also includes knowledge of every product that comes in contact with your body on a daily basis. While I think a plethora of competitors have already developed a competing product, its plausible that a competitor could decide to buy Beyond Meat rather than continue building its own plant-based protein brand. Sounds too good to be true, right? One of Beyond Meat's biggest and earliest investors was Tyson Foods, which had a 5 percent stake in 2016, later raised to 6.52 percent. Tackle stereotypes about who your customers should be. Is It Time to Buy? In this scenario, Beyond Meat grows NOPAT by 36% compounded annually over the next decade and the stock is worth just $44/share a 67% downside to the current price. The first campaign, The Future of Protein, was launched in 2015. Further, consensus estimates for Beyond Meats 2020 earnings are now $0.07/share. For example, evaluating the conditions of the animals before death, the process in which the meat is processed, the drugs and antibiotics that the animals were treated with before getting slaughtered. Beyond Meat positioned its products as similar to animal meat as they could. Like Comment Share . Several of Beyond Meats competitors, including Hormel, Nestle, Kellogg, Tyson, Kroger, ConAgra, and Kraft Heinz, enjoy key competitive advantages: These advantages are very important and very difficult, if not impossible, for new entrants like Beyond Meat to match or overcome in the near term, if ever. Beyond Meats case also shows that a marketing strategy is not fixed: it has to evolve along with the companys positioning. Founder and Tech Inventor at Princess Technologies. There are currently 7 million shares sold short, which equates to 9% of shares outstanding and just over one day to cover. Things Are Only Getting Worse for Beyond Meat Stock. It has put them in a competitive sustainable advantage position because others will have to spend a lot of money on research and development to get their plant-based burger to taste like theirs. However, given the low margins and overvalued stock price, I think it would be unwise for a larger firm to acquire Beyond Meat at current levels. They only get anxious when they realize that they havent eaten something theyve come to believe they need., Beyond Meat believes that protein is protein and consumers shouldnt care if it comes from a plant or an animal. The company has a culture of accountability among its employees: they are all responsible for driving up performances by making suggestions, pointing out what is not working. We can perceive more confidence from the company, in line with its media and advertising strategy. If, however, McDonalds chooses to not continue on with the PLT or finds another supplier for its plant-based protein items, BYND could fall even further. Therefore, the future will be bright, but they need to continuously gain market share by introducing new products and innovation within the plant-based space. There have been many stories of grocery story employees getting told by their bosses to take the expired meat and mix it with regular meat and put it back out there on the shelf. To justify its current price of $135/share, Beyond Meat must immediately improve its NOPAT margin to 5% (same as Tyson and more than double its current margin of 2%). This wasn't a cheap decision -- Beyond Meat incurred a charge of nearly $6 million to repack and reroute this inventory in response to consumer demand. Plant based meats are not filled with dead animals which include bacteria growth and can contain other substances such as feces. Eating meat has long been associated with masculinity. This makes a lot of sense since only2.7%of packaged meat sales in the United States are plant based. Beyond Meat Inc stock (NASDAQ: BYND), a leading-edge food company that produces meat directly from plants - an innovation that provides taste and texture of animal-based meat products along. If revenues expand 2.7x over the next few years, instead of the P/S shrinking from around 17x presently to less than 10x, a scenario where the P/S metric falls more modestly, perhaps to about 13x looks more likely, considering the fact that profitability is also projected to see sharp improvement. Big brands have started plant-based meats and substances that are more healthy in order to show that Beyond Meat is not the only plant-based guys in town and gain some market share. Plant-based meat alternatives are on the rise and not just with vegans. Additionally, when their Chicken-Free Strips were finally taken off the market in 2019, they did so quietly. The company's second-quarter 2020 earnings report, released Tuesday after the markets closed, revealed that it's still experiencing rampant growth. This assumption is highly unlikely but allows us to create best-case scenarios that demonstrate how high expectations embedded in the current valuation are. Now, lets proudly assume what they are: a plant-based burger, extracting plant proteins to make a tasty and healthy burger. Remember the man-ish look of the burger boxes, the focus on the amounts of protein? Do you like this content? Distribution and use of this material are governed by Recent Improvement in Profitability Was Short-Lived. The larger the firm gets, the more difficult it becomes to achieve large year-over-year (YoY) growth rates. They clearly prioritize innovation. The main difference is that Impossible Foods takes its proteins from soy whereas Beyond Meat extracts it from peas. Fiduciaries should avoid Beyond Meat Inc. (BYND). Considering these competitors are already supplying plant-based protein products, Beyond Meat faces an increasingly uphill battle to reach the size it needs to match the cost efficiencies of larger competitors like these two established firms. And if this happens, you need to have others you can roll out. This would be unreadable! We can spot changes in the design since their arrival. Figure 1: Consensus Revenue Growth Estimates: 2020-2025, 2020-2025 revenue growth rates based on consensus estimates, Competition is Plentiful and Has Competitive Advantages. With the high expectations of consumers and the competition they were about to create, knowing that they got in during the right time when consumers would take it as a positive and embrace this new way to eating meat, or meat substitute.. With low margins and little control over the majority of distribution, I think shares can fall sharply from current levels. This is one of the biggest first-day pop-ups in recent history. Resourceful, strategic, and self-directed leader with a proven record of achievement in global account management, business development and sales strategy leadership. It may even get heavier as more people understand healthy food from non-healthy food. Plant-based eaters now account for 8% of the global population. From the Beyond Burger to Beyond Sausage, and their latest Beyond Meatballs this brand is really on a roll. Beyond Meat, a producer of plant-based meat substitutes, was founded in 2009 in Los Angeles, California. In 2021 Beyond Meat's revenue increased by 14.2% to reach $464.7 million. Since going public, four of its six quarters have shown improvement from. Even more impressive is that Beyond Meat is, well, a food company (it develops plant-based meat products) and the sales for 2018 were only $87.9 million (and yes, the company has yet to post a . Heres a quick summary for noise traders when analyzing BYND: Executive Compensation Adds Additional Risk. Moral of the story? While Beyond Meats SG&A (which includes marketing and advertising expenses) represents a large percentage of the firms TTM revenue, the firms total dollars spent on SG&A pales in comparison to larger competitors. Its an era of growth for the still young start-up. Beyond Meat Is Down 93% From Its High. Inside Beyond Meat's lab, where the company transforms plants into faux meat with microscopic analysis and robot mouths. The organizational goals have to be settled and explained. Get the latest information and insights into the world of brand. Now, information and videos are easily assessable to people of all ages to make a truly informed decision on healthy options such as plan-based meat. Organic growth along with benefits from the recent partnerships are expected to support continued healthy growth in retail as well as the restaurant segments of Beyond Meat, potentially taking the companys revenues to almost $1.1 billion by 2023. Now, if Beyond Meats revenues grow 2.7x, the P/S multiple will shrink by more than 60% from its current level, assuming the stock price stays the same, correct? Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The QSR is looking to get the lion's share of the meat substitute market with Beyond Meat. They have sharply improved from -93.3% in 2016 to -4.2% in 2019. Beyond Meat entered into a partnership with PepsiCo. Often the largest risk to any bear thesis is what I call stupid money risk, which means an acquirer comes in and buys Beyond Meat at the current, or higher, share price despite the stock being overvalued. Critical Details Found in Financial Filings by My Firms Robo-Analyst Technology. Rising beef prices, coupled with the overwhelming at-home food consumption trend, present an unforeseen opportunity for the company to entice new customers by doubling down on grocery sales. While vegans and vegetarians are less picky when it comes to whether or not meat substitutes really taste and feel like meat, regular meat-eaters are much more tricky to convince. + Follow. What can you learn from this? January 2021. Figure 6: Beyond Meats Adjusted EBITDA Misleads on Profitability, BYND Adjusted EBITDA Misleads On Profitability, Doing the Math: Valuation Implies Significant Disruption of the Entire Meat Industry. However, this trend is expected to reverse in the short term and the company will once again get on its fast growth track and there are multiple trends that support this growth outlook. This does not boil down to just knowledge on slaughter houses, animal conditions, bacteria etc. word of mouth. Plants come directly from the sun and reap the energy created from the sun. Market Drivers- Market drives come from the availability of knowledge on healthy products vs. mass marketing for bad products. In this scenario, Beyond Meat grows revenue by 37% compounded annually (which results in NOPAT growing 42% compounded annually) for the next 12 years. However, the fundamentals reveal this stock is more style than substance. How did Beyond Meat become the leader it is today? This adjustment represented 3% of reported net assets. For example, Tyson Food, one of the biggest and earliest investors in Beyond Meat, which had a 5% stake in 2016 exited in 2019. Success of any of Beyond Meats competitors could also further threaten future profit growth for Beyond Meat. Plant based burgers are not new but Beyond Meat has been able to capture more of the mainstream market. last yearwhere it will: develop, produce and market snacks and beverages made from plant-based protein bringing together Beyond Meats innovation expertise with PepsiCos marketing and commercial capabilities. PepsiCo is known for its marketing prowess and just working with PepsiCo will expand Beyond Meats reach. Over the past two years, the firm has burned a cumulative $179 million (2% of market cap) in FCF. Increased U.S. foodservice and international channel net revenues were more than offset by reduced U.S. retail channel net revenues, which decreased 19.5% compared to the year-ago period. The Motley Fool has a disclosure policy. They knew that vegans and vegetarians would use and love the product regardless if they targetted them because the products were so superior to what they were used to. KFC and Beyond Meat are partnering with YouTube star and influencer Liza Koshy to help reveal the debut. Showing that meat is not necessary to enjoy the same flavors while reaping more plant-based benefits. Fourth Quarter 2021. Over the past twelve months, insiders have purchased 700 thousand shares and sold 4 million shares for a net effect of 3.3 million shares sold. The California-based company is orienting its retail business around Kroger Co., Walmart Inc., Publix Super Markets Inc., Costco Wholesale Corp. and Whole Foods Market, according to internal company presentations and documents. Investors should note that maximizing customer acquisition through the retail channel will probably crimp the company's admirable growth rate, as future promotions and new iterations of discounted value packs will reduce the amount of recorded sales (net revenue), as we've discussed above. Brands. Figure 11 shows the implied values for Beyond Meat assuming Kraft Heinz wants to achieve an ROIC on the acquisition that equals 6%. DOI: 10.2991/assehr.k.211209.003. One of the most notable adjustments was $11 million inoperating leases. Leverage partners with larger platforms to expand reach. By July 2019, Beyond Meat could claim a market value of $11.7 billion which was a huge increase from its pre-IPO valuation of $3.8 billion. Its stock value gained 163% on the day of its stock introduction. And the organization continues to spill a slight amount of red ink, generating a loss of $10.2 million over the last three months versus a loss of $9.4 million in the second quarter of 2019. When Beyond Meat was met with the failure of their Chicken-Free Strips their first real product they didnt fold. If you do subscribe to our retail trends newsletter to get the latest retail insights & trends delivered to your inbox. However, Kelloggs appears it is ready to launch Incogmeato and recently partnered with Postmates to deliver free Incogmeato samples to residents of Denver and Dallas. Combine revenue growth with the fact that Beyond Meats net income margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory. For this analysis, I choseKraft Heinz as a potential acquirer of Beyond Meat since it doesnt have a pea-protein based product like Beyond Meats and has a history of acquisitions. They did not service the vegan and vegetarian markets as traditional players did. The future is one where the meat case is going to be called the protein case and consumers will be able to buy plant-based and animal-based protein side by side,saidEthan Brown, founder and CEO of Beyond Meat. Figure 3: Operating Expense as % of Revenue: Beyond Meat vs. Beyond Meats success comes partially from the fact that it has been able to evolve alongside or prior to consumer demand. See Figure 8 for details. Gross profit was $122.3 million, or gross margin of 30.1% of net revenues; Adjusted gross profit was $133.7 million, or Adjusted gross margin of 32.9% of net revenues, reflecting exclusion of expenses attributable to COVID-19. Figure 3 shows Beyond Meat spends 37% of its revenue on operating expenses (SG&A, R&D, and restructuring costs), which is well above peers.