“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, December 09, 2019

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

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Option Trade – Beyond Meat Inc (NASDAQ: BYND) Calls

Monday, December 09, 2019

** OPTION TRADE: Buy the BYND FEB 21 2020 80.000 CALL at approximately $6.40.

Place a high pre-determined sell at $12.80.

Include a protective stop loss of $2.55.

The "meatless" meat company Beyond Meat Inc (NASDAQ: BYND) has had a wild ride as a public company. The company announced Thursday that its plant-based burger patties would appear in select Costco stores. The move from the young company comes as competition for retail shelf space intensifies against rival plant-based meat producer, Impossible Foods and others. This move should help propel the stock upwards.

Beyond Meat said that its popular Beyond Burgers will be sold at Costco stores in states including Texas, Florida, and New York for $14.99 per eight-patty pack.

Beyond Meat has been one of the most prolific IPOs of 2019 and currently sits around $76.22 per share, which represents around a 190% return. BYND stock at one point rose over 858% to trade at $239.71 per share.

And at the present time is undervalued below $80 given the company’s long-term growth prospects.

The Plant-Based Food Market.....

The Good Foods Institute, a Nonprofit organization, calculated that the plant-based food market is now worth almost $4.5 billion in the U.S. and has grown around 11% in just the last year. Plant-based meat itself grew 10% last year, which was down from the 25% growth it saw in the previous year.

However, industry analysts from Markets and Markets still project that the plant-based meat industry will grow internationally from $12.1 billion in 2019 to a $27.9 billion market by 2025.

Plant-based milk products bring in around $1.86 billion in domestic sales and are the definitive leader in the plant-based food market. The plant-based milk products now hold a 13% market share in the overall retail milk market thanks to the 61% growth it saw from 2012 to 2017.

Moving Forward.....

The plant-based meat industry looks poised to continue its growth and Beyond Meat will continue to set their sights on the emerging market. Beyond Meat’s partnerships with McDonald’s and others are a step in the right direction.

Right now, McDonald’s is testing out Beyond products in a few locations. Given how other retail roll-outs of Beyond have gone, it is quite likely that McDonald’s Beyond test has gone very well. As such, it is also quite likely that McDonald’s announced a nationwide roll-out of Beyond products fairly soon. Such an announcement could provide a huge lift to BYND stock.

Procuring more restaurant and retail partnerships are vital for Beyond Meat. The restaurant partnerships will be especially crucial as it will help establish Beyond Meat’s brand awareness, which will become paramount as more meatless products hit retail shelves.

Fourth quarter earnings — due in January 2020 — should be really good. The Beyond Meat growth narrative hasn’t lost any steam over the past few months. If anything, its gained momentum, despite the share price erosion. For example, the Los Angeles Lakers — the most-widely followed and talked about team in the NBA — just partnered with Beyond Meat. Taco Del Mar is rolling out Beyond tacos across its entire store base. And, Dunkin’ Brands (NYSE:DNKN) just rolled out Beyond products across the nation.

Beyond is looking to expand internationally in a big way in 2020. Specifically, the company is pushing more aggressively into Canada, and is looking to enter the Asian market in 2020. This international expansion will add more firepower to what is already super-charged growth narrative. More firepower will help propel a rebound in BYND stock in 2020.

Future Earnings.....

The fiscal 2019 estimates call for sales to soar over 213% to reach $275.28 million. Meanwhile, the company is projected to report an adjusted loss of $0.20 per share.

Looking ahead to the next fiscal year, the estimates project sales to climb 65.7% to hit $456.23 million. And BYND is expected to jump from a full-year loss to positive earnings of +$0.39 per share.

Analysts’ Opinions.....

Beyond Meat was upgraded by research analysts at Sanford C. Bernstein from a “market perform” rating to an “outperform” rating in a note issued to investors on Tuesday, November 5th. The brokerage presently has a $106.00 target price on the stock.

Several other equities analysts have recently commented on the company…..

  • JPMorgan Chase & Co. set a $138.00 target price on shares of Beyond Meat and gave the stock a “buy” rating in a research note on Tuesday, October 29th.
  • Goldman Sachs Group reiterated a “neutral” rating and issued a $122.00 price target on shares of Beyond Meat in a report on Tuesday, October 29th.
  • Exane BNP Paribas began coverage on shares of Beyond Meat in a report on Monday, September 23rd. They issued an “underperform” rating for the company.
  • DA Davidson cut their price target on shares of Beyond Meat from $130.00 to $84.00 and set an “underperform” rating for the company in a report on Tuesday, October 29th. They noted that the move was a valuation call.
  • Finally, Zacks Investment Research upgraded shares of Beyond Meat from a “hold” rating to a “buy” rating and set a $92.00 price target for the company in a report on Wednesday, October 30th.

Three research analysts have rated the stock with a sell rating, nine have given a hold rating and five have assigned a buy rating to the company. The stock has a consensus rating of “Hold” and an average target price of $113.22.

Summary.....                

The continued effort to get Beyond Meat’s products into more stores and restaurants is a good sign moving forward. While our estimates project a significant top-line slowdown in fiscal 2020, it also calls for Beyond Meat’s first profitable year, which would be a great feat for the young company.

Shares of BYND opened at $76.22 on Thursday. The company has a debt-to-equity ratio of 0.06, a quick ratio of 6.38 and a current ratio of 7.46. The stock has a 50-day moving average of $86.27 and a 200-day moving average of $134.46. Beyond Meat has a one year low of $45.00 and a one year high of $239.71.