What Bulls And Bears Are Saying As BYND’s IPO Goes “Beyond” Parabolic

With shares of the highly-anticipated ride-sharing company Lyft (LYFT) trading lower by nearly 20% from its late March IPO price, there was little to suggest investors had “irrational exuberance” heading into yesterday’s IPO of Beyond Meat (BYND).

Beyond Meat, a provider of plant-based meat alternatives initially priced its IPO in the $19-$21 range before raising both the offering range ($23-$25) and number of shares (by 1 million) on strong demand earlier this week. Even that elevated price point failed to satiate investors’ demand, as shares rocketed higher by more than 160% in their first day of trade yesterday, followed by a bullish gap higher in today’s US session.

BYND’s surge represents the largest one-day rally in an IPO since 2000 among companies with a market capitalization of at least $200M.

(Click on image to enlarge)

https://www.cityindex.co.uk/~/media/research/global/2019/05/dealogicipos.jpg

Source: Dealogic

Below, we outline both the bull and bear cases for the stock moving forward:

The Bull Case

BYND sits at the crossroads of several major secular trends, including fears about climate change, a focus on healthier eating, and the growing popularity of veganism/vegetarianism. The first company to create a tasty, affordable alternative to traditional meat sources will capture a substantial portion of the massive global meat market, which is estimated at $1.4T annually.

Tyson Foods (TSN) is currently one of the leaders in the space and sports a market capitalization of more than $22B. Even after BYND’s surge yesterday, the company’s market cap is less than a fifth of TSN’s, and some analysts suggest BYND should eventually trade at a premium, given its stellar 20%+ gross margins.

The Bear Case

The bear case for the stock comes down to valuation. At just $88M in global revenue, the company trades at an astronomical 43X its current sales. While those sales are growing rapidly (170% from 2017 to 2018), the company nonetheless saw $19M post-tax operating loss last year.

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Gary Anderson 1 month ago Contributor's comment

Beyond Meat is sort of Vegan. It is a high salt product in the Fast Food space. It should not improve the high salt bad reputation of the fast food industry.