Wall Street has fallen head over heels for plant-based meat company Beyond Meat (NASDAQ: BYND).
BYND stock staged the biggest opening day rally since the 2008 financial crisis. And since it made its public debut last Thursday, the stock is up a whopping 173%.
The Beyond Meat IPO has been one of the most hyped market events in recent memory but there’s more to the story than just hype, and the massive success of the IPO could very well prove to be just the tip of the iceberg for this stock.
BYND’s secular growth narrative is pretty simple. There’s a huge shift happening where consumers are migrating from animal-based diets to plant-based diets, evidenced by total sales of plant-based foods in the U.S. rising by 17% last year – and that double-digit growth trajectory looks to be on a pretty consistent long-term path.
A big part of that movement toward plant-based diets includes meat, and plant-based meat sales rose by 23% in the U.S. last year. While alternative meats still represent less than 1% of total meat sales in the U.S., that isn’t likely to last for long.
According to Bernstein analyst Alexia Howard, the alternative meat industry—which Beyond Meat is a major player in—could be worth north of $40 billion within the next decade.
If alternative meat can follow a similar path to plant-based beverages—think almond milk—then the industry will boom and Beyond Meat will be well positioned to capture a chunk of that $40 billion pie.
Beyond Meat controlled about 12% of the plant-based meat market in 2018, up from under 6% market share in 2017, and saw revenues of just over $80 million last year. In the last half of 2018, revenue growth was just over 175% and is projected to be around 200% in the first quarter of 2019. As this growth continues, Beyond Meat could control 15 – 25% of the alternative meat market in 2019.
“Recent and planned expansions in production capacity look set to facilitate rapid sales growth in 2019 and beyond,” Bernstein’s Howard wrote in a note to clients.
Howard noted that Beyond Meat is facing competition from companies like Impossible Foods, but the rising consumer demand should allow for multiple brands to share the market, she wrote. What’s more, the African swine fever outbreak in China could soon drive global meat prices higher, making alternative meats look more attractive to curious consumers.
Bernstein gave BYND its first Buy rating on Monday and set a twelve-month price target of $81 – 19% higher than Thursday’s closing price.