Beyond Meat Analysis
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Beyond Meat is the leading company in the plant based protein category. Ethan Brown is the guy behind this story. In the last few years, he managed to create a Brand that consumers recognise, trust and love.
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The company despite not being profitable yet, - it has rather a strong balance sheet. $215m in its Cash & short-term investments, and their debt level is $50m. Based on the company's current free cash flow it has a stable cash runway for more than a year.
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If you look at the trends you will see that a mere 5% of the US population is on a meat-free diet. However, the consumers who are interested in the products are meat eaters who are looking to reduce but not eliminate their meat consumption.
The trend is very positive, consumers and more specifically the young generation are looking for meat alternatives, in order to lower their meat consumption and the way that the company managed to attract those consumers and because of what they do for the environment.
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The Good
The company has managed to get a deal with Yum. If you order a Pizza Hut (Under the Yum Brands) you will get a box with the Beyond Meat Brand on the Top, which gives a boost of awareness for the brand.
There’s a good chance that the company behind McPlant, the vegan burger by McDonalds, will be Beyond Meat. That’s a great opportunity to further increase revenue, and touch millions of consumers with the power of McDonalds.
The Bad
Once the Beyond meat was introduced in Yum and other local and non-local restaurants, - at the beginning was a huge excitement and sales were over the roof. However, after a few weeks the excitement went down and sales were flat.
The Ugly
If the deal McDonalds goes through (after the trial period) it will indeed be a great one for the company’s revenue. However, the deal did not go according to plan for Mr. Ethan Brown. The plan was for the consumers to go to McDonalds and order Beyond Meat burger, and not a McPlant, in order for the Brand to get more exposure. It’s like when you’re having a coke, and the Coca-Cola sign is there instead of Pepsi.
This is a very ugly deal and a huge loss for the company. The CEO has admitted it, that it was his mistake.
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Last year the company saw its revenue growth by triple digits, and it grew almost 2x than the closest competitor. The pandemic has hit the company's foodservice business hard, and some investors are wondering if it will be able to bounce back, afterwards.
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The company's last 12 months revenue was $403M. Let's be very conservative here, and say that the next 2 years instead of the company growing triple digits will grow high double digits about 90%, and low double digits thereafter.
2022 will hit a billion-dollar sales
2024 will hit $2B in sales
Let's say that their margin will be around 15% - will give us about $300M in the bottom line. Multiplying this by 40 multiple will give us 12 billion in market cap.
Now the company is trading about 8 billion in market cap, which makes it a good deal if you have a long-term horizon.
What do you think of Beyond Meat? Are you bullish or bearish?