Shares of plant-based meat maker Beyond Meat (NASDAQ:BYND) perked up on Thursday after fast-food chain Taco Bell announced that it will be launching a new plant-based protein with Beyond Meat in 2021. BYND stock jumped more than 10% on the news.
Zooming out, the Taco Bell-Beyond Meat partnership simply underscores why BYND stock is a great stock to buy for long-term investors.
Consumer preferences are shifting towards plant-forward diets. Fast food chains, restaurants and grocery stores are all pivoting to match this demand shift. They’re partnering with plant-based meat makers to “veganize” their menus. Beyond Meat sits alone at the top of the list of potential plant-based meat makers with leading technology, production capability and brand awareness.
Everyone is partnering with Beyond Meat. Not just Taco Bell. But McDonald’s (NYSE:MCD), too. And Carl’s Jr. And Del Taco, Subway, Luna Grill, Bareburger, BurgerFi, Dunkin, Doghaus and so many more. The list goes on and on.
The implication only gets clearer. Plant-based meat is the future of eating, and Beyond Meat is the undisputed leader of this space.
So, buy and hold BYND stock for the long-haul.
Here’s a deeper look.
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. This future is already coming to life. You’re already starting to see plant-meat options pop up everywhere. This transition will only accelerate in the coming years.
That, of course, creates a bullish backdrop for BYND stock.
Beyond Meat Is the Undisputed Industry Leader
In my mind, 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 also has many more products than other plant-meat makers — including plant burgers, plant sausages, plant pork, etc — which is why its partnership network extends from McDonald’s burgers to KFC chicken.
Second, Beyond Meat has distribution advantages. Beyond Meat is already in 122,000 retail and food-service outlets, including some of the biggest names in the space. 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.
Huge Upside Potential for Beyond Meat Stock
The long-term upside potential in BYND stock is enormous.
The global meats market that Beyond Meat is aggressively disrupting measures $1.4 trillion, and 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 head 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 BYND Stock
With each new major fast food chain partnership or grocery store expansion, it becomes clearer and clearer that: 1) plant-based meat is the future of meats consumption, and 2) Beyond Meat is unrivaled in this space in terms of technology, distribution, and branding.
That’s why BYND stock is one of the best long-term growth stocks to buy in the market today.
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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Written by Luke Lango.
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