As Wall Street’s rally continues this week, the Nasdaq and S&P 500 are soaring, but one industry-leading stock is doing better than the rest
When opening up any sort of news app or site this morning, you’ll likely be bombarded with a million articles on how Tesla (NASDAQ: TSLA) has just closed at an all-time high of $949.92 per share, or that the S&P 500 (NYSEARCA: VOO) has recovered all of its losses from 2020’s downturn. And let’s not forget that the Nasdaq (NYSEARCA: QQQ) has reached its February all-time highs again.
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However, as earnings season draws to an end and companies begin ramping up to close out Q2 strongly, one industry leader has been quietly growing in the background and setting the stage for another record-breaking year. I am of course talking about Beyond Meat (NASDAQ: BYND).
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Why is Beyond Meat’s stock up?
A lot of yesterday’s market moves were related to China, whether directly or indirectly. Tesla and NIO (NYSE: NIO) rose due to increased Tesla Model 3 sales in China, Stitch Fix (NASDAQ: SFIX) revealed in yesterday’s earnings call that revenue fell 9% in Q1 due to supply chain issues related to Chinese-manufactured brands, and now Beyond Meat has risen 21% because of its recent moves into the world’s fastest-growing economy.
Last week, the plant-based meat company brought its products to China and on Monday the company announced a partnership with Sinodis, a food distribution company. Sinodis serves around 4,500 locations in China alone, including wholesale retailers, restaurants, and hotels. With that kind of reach at its fingertips, it’s no surprise that Beyond Meat’s stock is sizzling right now.
The leader in meat alternatives already boasts an impressive roster of partners in both the West and China, including Dunkin’ Brands (NYSE: DNKN), Yum China’s (NYSE: YUMC) Taco Bell, Pizza Hut, and KFC, a limited McDonald’s (NYSE: MCD) in Canada, and most recently Starbucks (NASDAQ: SBUX). This Starbucks deal is very important, especially in the Chinese market where the coffee giants’ biggest rival, Luckin Coffee (NASDAQ: LK), has been decimated due to fraud allegations and is facing a potential delisting from the Nasdaq on the way. Though it is still operating, as usual, this is likely to be a costly time for Luckin, which will hinder growth.
It’s easy to see why analysts are bullish on Beyond right now, which has seen its stock rise 18.5% year-to-date, compared to the S&P 500’s 0.9% in the same period.
Beyond Meat’s pure-play advantage may be under threat
While many of Beyond’s traditional supply chain issues could be solved in China due to this problem, it has still always had the advantage of being the only pure-play public company. This has seen it stave off the threat from larger corporations such as Tyson Foods (NYSE: TSN) and its privately-owned counterpart, Impossible Foods.
Being a pure-play has advantages that cannot be overlooked, as seen in my colleague Mike’s article below.
It’s how a company such as Virgin Galactic (NYSE: SPCE) has managed to become such a popular investment since going public last October, despite private competitors such as SpaceX and Blue Origin — owned by Amazon (NASDAQ: AMZN) CEO Jeff Bezos — being far more attractive options.
Now, Beyond’s pure-play advantage may come under threat as the meat-free craze grows. Larger companies like Tyson and Nestlé have huge faux meat offerings and may be willing to spin these off in the future, while Impossible Foods is widely considered the ‘true leader’ in the field. There is also the danger that Beyond’s pea protein-based meat is no longer unique. In fact, you can go to any discount store such as Walmart (NYSE: WMT), Lidl, or Costco (NYSE: COST) and find unbranded alternatives at lower prices.
Beyond’s dominance is likely to be short-lived as the value of the industry becomes more recognizable.
Should I invest in Beyond Meat?
Despite the inevitability of rising competition, you still can’t dismiss Beyond Meat’s first-mover advantage. I am a shareholder and believe there are a number of reasons to invest.
- The plant-based meat market itself is expected to rise to $240 billion by 2040 as more and more people look for healthier, greener alternatives to their daily meat consumption.
- Beyond’s revenue grew 239% in 2019, with the company predicting further growth in 2020 and net income to jump 70% for the full year to somewhere between $490 – $510 million.
- Beyond Meat is not just focusing on the restaurant business, which has seen massive declines due to the virus, but now offers its products in the likes of Walmart, Target (NYSE: TGT), and Safeway (NYSE: SWY).
It’s still early days for Beyond as a public company, but despite the coronavirus, it still beat expectations at its May 5 Q1 earnings call, which will give investors a lot of confidence as Q2 draws to a close.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.