Thursday 2 May 2019 7:57 am

DEBATE: At $1.5bn, is plant burger firm Beyond Meat over-valued?


Chris Beauchamp is a senior market analyst at IG.

Chris Beauchamp is a senior market analyst at IG.

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At $1.5bn, is plant burger firm Beyond Meat over-valued?

Chris Beauchamp, a senior market analyst at IG, says YES.

For many, Beyond Meat’s IPO would seem to mark the perfect “market top” moment. A company producing a cutting-edge product, with ongoing losses and the risk that it may never make a profit, is seeking to become publicly traded.

Like so many new firms, it has yet to make any money, with losses each year since its foundation. Investors would be buying into a company where hope is one of the main drivers for the future.

Leaving aside the possibility that it will change consumption habits, investors rushing to buy in the wake of the IPO are likely to see their investment suffer in value in the short term. There are positives, such as the existing agreements with some restaurant chains and steadily rising margins, but the firm will face stiff competition from much bigger competitors, which could easily see it overtaken by those with economies of scale that allow them to produce more at lower prices.

Changing the world is one thing, being a successful investment is something else – and it is not clear that Beyond Meat yet falls into the latter category.

Read more: Extra large order: Beyond Meat hikes offering ahead of float

Olivia Utley, deputy editor at TheArticle, says NO.

Valuing a loss-making company which does not know when it will report a profit at $1.5bn sounds punchy, to put it mildly. But in the case of Beyond Meat, it makes sense.

According to a recent survey, the number of vegans in Britain has increased by more than 360 per cent over the past decade, and the trend in the US is even more extreme. Given that the movement is being led by the under-35s, it seems almost certain that “plant-based eating” is here to stay.

That means that the global meat market, which is worth a mouth-watering is $1.4 trillion, is ripe for disruption. Any company ready to take a bite out of it can expect huge rewards sooner rather than later. Beyond Meat is one such company. Its products are already available at 30,000 outlets in the US and overseas, and eminent food critics are queueing up to rave about it.

When the vegan revolution begins in earnest, Beyond Meat will more than live up to its valuation.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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