For investors, there’s a wealth of opportunity in the meat-alternative sector.
Market research company The NPD Group, Inc wrote that 18% of Americans have been attempting to consume less meat, opening up market opportunities for meat alternatives. (Source: “Beyond Meat’s stock surges to all-time high,” CNBC, July 23, 2019.)
That trend will likely grow as people become more health- and environment-conscious. Couple that with the fact that the meat industry hasn’t exactly been celebrated for its—at times—vicious treatment of animals and you have the perfect storm of an opportunity.
The food industry is, as you’d expect, big business. The meat-alternative sector, if it reaches its potential, has the ability to be the next major emergent industry. The next decade could see the meat-alternative market top $140.0 billion. (Source: “Alternative meat to become $140 billion industry in a decade, Barclays predicts,” CNBC, May 23, 2019.)
Beyond Meat Stock Continues to Excel
I have a relatively long history of proudly championing Beyond Meat Inc (NASDAQ:BYND). Last year, I went as far as proclaiming it the greatest tech initial public offering (IPO) of 2019, with gains exceeding 300%.
But many believed that BYND stock had already seen its best days. I disagreed. And so far in 2020, Beyond Meat stock has been making me look good.
First, a quick recap of the Beyond Meat stock story so far.
Chart courtesy of StockCharts.com
BYND stock hit the ground running, seeing massive gains for months after the Beyond Meat IPO, culminating in gains exceeding 1,000%! That type of growth is only dreamed of over the course of years, let alone just a few months.
But, as you’d expect, when a stock flies that high, that fast, there’s bound to be a pullback. And in this case, the pullback hit hard and swift.
From Beyond Meat stock’s high point of about $240.00 per share, it fell to a low of about $75.00 heading into the new year.
And then 2020 arrived.
Chart courtesy of StockCharts.com
Since the calendar turned, we’ve seen massive gains from BYND stock. At the time of this writing, it has shot up by almost 70% since the year began.
And this, frankly, is exactly what I predicted would happen.
You see, Beyond Meat Inc had a lot of initial hype that propelled its stock to lofty heights in its first few months on the public market. The magnitude of that growth was unsustainable, and it was clear that a correction was inbound.
On the flip side, as mentioned earlier, the meat-alternative industry has massive potential.
And a lot of that market is up for grabs at the moment, with Beyond Meat being the first big company to throw its hat into the ring. And so far, its shares have enjoyed their time on the stock market, seeing massive gains.
Again, doubters came out of the woodwork when the Beyond Meat stock soared as high as it did. But even with its 200% gain over its IPO price, I was confident in this stock’s ability to soar ever higher. And that’s just what it has done right out of the gate.
I believe that even more gains could be on the way for BYND stock.
Impossible Foods IPO
There’s another opportunity that, in my mind, is even juicier than Beyond Meat stock: meat-alternative IPOs. They could be the greatest tech IPO successes of the year.
What Beyond Meat has done is essentially play a proof-of-concept role for all the other companies looking to enter the meat-alternative market.
As such, I anticipate that we’ll see more and more companies try to get in on this sector while it’s as full of opportunity as it is now.
With that in mind, we should turn our attention toward Impossible Foods Inc. This competitor of Beyond Meat is eyeing a potential IPO in 2020.
If an Impossible Foods IPO happens in 2020, investors could end up making big gains if things go right.
Reports are that the company is looking to nab a valuation between $3.0 and $5.0 billion in its next fundraising round, possibly doubling the valuation of about $2.0 billion that it had in May. (Source: “Exclusive: Impossible Foods eyes doubling valuation with new funding,” Reuters, November 25, 2019.)
“We need to consider every option for fueling our long-term growth. However, we have not announced any plans or timing regarding an IPO,” said an Impossible Foods spokesperson. (Source: Ibid.)
Considering that Beyond Meat, at one point, had a valuation of about $12.0 billion before coming down to its current market capitalization of about $7.6 billion, a $5.0 billion valuation for Impossible Foods isn’t outrageous.
The thing to remember is that, the lower the valuation is upon launch, the higher the chance for massive gains after the Impossible Foods IPO.
One of the many mistakes that tech companies make when they hold an IPO is that they bask too long in private money, soaking in investments and juicing their valuations to ever-loftier heights. It’s what happened at Uber Technologies Inc (NYSE:UBER), much to investors’ chagrin.
Uber, however, had a host of problems that Impossible Foods does not. Namely, losing billions of dollars quarter after quarter for years on end with little hope for immediate profitability. Couple that with a bloated valuation and it’s easy to see why the Uber IPO faltered as hard as it did.
While Impossible Foods Inc. shouldn’t have to worry about such poor financials, there is concern that private investors will get too excited about Impossible Foods stock before it even hits the market (due to BYND stock’s performance) and shower it with private money.
Again, if Impossible Foods Inc. stays private for too long (say, eventually hitting a valuation of more than $10.0 billion before the industry has appropriately matured to warrant that valuation), we could see Impossible Foods stock run into problems.
But, as it stands now, the company is in a very good spot and appears to be making the right moves.
If Impossible Foods stock hits the market in 2020, we can expect to see investors flock to it in droves. After all, nobody wants to miss out on the next Beyond Meat stock IPO.
As long as Impossible Foods’ valuation doesn’t get out of hand, I anticipate that Impossible Foods stock could be among the strongest tech IPOs in 2020.
Here’s a caveat: I doubt we’ll see the 1,000% gain in a few months that BYND stock enjoyed, but shares of Impossible Foods could see massive gains in a short period and end 2020 on a high.
The key for any IPO, tech or otherwise (but especially tech), is hitting the market at the optimal time to be both novel and innovative but without being weighed down by private investment bloat and years of financial losses.
The good thing here is that, as mentioned, the meat-alternative sector is continuously expanding, not just in North America, but around the globe.
If the meat-alternative industry sees inroads in large countries like China, then we could anticipate the market to expand rapidly. That would, in turn, likely lead to massive gains for stocks like Beyond Meat and Impossible Foods.
The overall picture is an emerging industry with multiple solid plays that not only could register huge gains in a short time, but could also be among the top long-term picks.
“Edible” is often not a feature we expect of innovative tech hitting the market, but that’s exactly what we have with Beyond Meat stock and Impossible Foods stock: edible tech.
Both companies are using technology to innovative on a legacy industry (meat), hoping to disrupt said industry. Unlike goofy niche technologies (I’m looking at you, GoPro Inc (NASDAQ:GPRO)), the food industry is rife with opportunity.
Add the fact that the companies operating in the meat-alternative space will probably continuously improve their products—making them tastier, cheaper, and more varied as time goes on—and you have a pretty solid sector that could lead to big gains for years to come.
No industry is foolproof, of course, but considering the push against climate change and the meat industry, and the fact that companies like Beyond Meat and Impossible Foods offer elegant options to address both of these issues, the meat-alternative sector is something that investors ought to keep in their sights.