Beyond Meat shares could rise tomorrow. Here’s why

Beyond Meat is reporting second quarter earnings tomorrow. Here’s why I’m going to buy shares before then.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Beyond Meat (NASDAQ: BYND) is the largest plant-based meat company in the world. At $122 today, its share price is 38% lower than its $196 high in July 2019. This price point represents great value to me. In 2016, I invested in Netflix before it became the giant of streaming, and Amazon before it became the king of ecommerce. Both companies’ share prices have since quintupled. I believe that Beyond Meat has the same long-term potential. It releases Q2 earnings tomorrow, and I think the share price will rise swiftly after. 

Why Beyond Meat?

Beyond Meat has potential because of its position of strength in this changing world. In the US, 2% of people identify as vegan, and 39% of people incorporate vegan products into their everyday diets. The market for vegan meat alternatives is expected to jump to $7.5bn globally by 2025. In a BBC interview with CEO Ethan Brown yesterday, he stated that “93% of the people that are putting the Beyond burger in their cart are also putting animal protein in.”

This shows that many people now want to reduce their consumption of meat. This can be because they want to limit their impact on the climate, improve their health, or because they are becoming increasingly uncomfortable with the realities of factory farming. 

Beyond Meat’s numbers are positive. It has total assets of $1.5bn for FY 2021 Q1, an increase of 185% compared to FY 2020 Q2. Even with the weakening effect of the pandemic, it reported revenue of $108.2m, only a 4.5% decrease compared to FY 2020 Q2. With the hospitality sector reopening worldwide, the company predicted in Q1 that revenue could soar by at least 19% in Q2.

Tackling the risks

I think what’s holding back large scale consumption is the high cost of plant-based meat. Tesco currently sells two Beyond Meat burgers for £4.40, while two comparable beef burgers cost £1.25. However, as the company grows, economics of scale should start to bring the price down. In February, it signed a three-year global deal with multiple fast food outlets including McDonalds, bringing plant-based meat further into mainstream consciousness. 

Across the developed world, there is a consensus that meat eating needs to be reduced to tackle climate change. I speculate that special taxes on meat could be in the pipeline, much like there are taxes on alcohol, tobacco, and sugar. To make a Beyond Meat burger, the company uses 99% less water, 90% less CO2, and 93% less land than is needed to make an equivalent beef burger. If taxes rise to cover the environmental cost of animal protein, plant-based meat could also become the more economical choice.

I only invest in things I feel I understand. As an unashamed meat eater, I barbecued a couple of Beyond Meat burgers yesterday. Subjectively, they were fairly close to the real thing.

There are risks though. The company has multiple competitors, such as Impossible Foods, which has recently taken market share by slashing their prices earlier this year. Beyond Meat could run into trouble if their competition catches up to them before they have expanded fast enough to benefit from economies of scale. Their profit margins are also coming under pressure from increased warehousing, transport, and ingredient costs.

However, McDonalds believes in the company’s future. That’s good enough for me.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charles Archer owns shares of Amazon and Netflix. The Motley Fool UK owns shares of and has recommended Amazon, Beyond Meat, Inc., and Netflix. The Motley Fool UK has recommended Tesco and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »