Beyond Meat Holds Tremendous Growth Opportunity, JPMorgan Says In Bullish Initiation

While Beyond Meat Inc BYND has a differentiated product and faces an expansive total addressable market, its margin upside seems underappreciated, according to JPMorgan.

The Analyst

JPMorgan’s Ken Goldman initiated coverage of Beyond Meat with an Overweight rating and $97 price target.

The Thesis

Beyond Meat is a leader in plant-based meat, with its flagship product — Beyond Burger — replicating ground beef from plant protein, Goldman said in the Tuesday initiation note. (See his track record here.)

The consumer response to this differentiated product has been highly encouraging, as is evident from the company’s revenue growth pattern, which accelerated from 84 percent in 2016 to 101 percent in 2017 to 170 percent in 2018 and around 200 percent in the first quarter of this year, the analyst said. 

JPMorgan expects the TAM for plant-based meat to grow 100-fold in the next 15 years to $100 billion.

Beyond Meat needs to capture only a fraction of this market— sales of $5 billion or more — to be successful, Goldman said. 

Apart from robust revenue growth, the company generated gross margin expansion of more than 3,200 basis points in 2017 and of around 2,700 basis points in 2018 on the back of scale benefits, the analyst said.

While expecting margin expansion to exceed 1,500 basis points over the next three years, Goldman said investors seem to be overlooking the company’s near-term margin and cash flow potential.

Price Action

Beyond Meat shares were up 6.95 percent at $85.21 at the time of publication Tuesday. 

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Beyond Meat IPO: What You Need To Know

Photo courtesy of Beyond Meat.