Eat dirt, Uber! Beyond Meat is most successful IPO of 2019 so far

By Sarah Min

/ MoneyWatch

Beyond Meat sizzles in market debut

The much-buzzed-about Uber IPO may have disappointed investors last week, but another California tech startup wowed shareholders in its May debut.

Alternative meat producer Beyond Meat saw its stock price surge 163% in its IPO on May 2, rising from $25 a share to around $65 in one day. And its shares have been climbing ever since. They were up 9% yet again on Wednesday to nearly $87 after the Canadian coffee chain Tim Hortons announced it's adding the company's meatless sausages to its breakfast menus.

That means Beyond Meat's stock price has soared nearly 250% in just two weeks in a rousing show of investor confidence. The company is now valued at about $5 billion — not bad for a small startup that has yet to turn a profit.

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Investors betting on a meatless future

Beyond Meat is not the only plant-based company on the market (California-based Impossible Foods also markets meatless meat products like its Impossible Burgers to meat lovers), but it is the first of its kind to go public. The embrace by Wall Street suggests shareholders are betting on more than just the company — they're betting on the future of the alternative meat category.

Investors are venturing that meatless meat companies will go the same way as the non-dairy milk industry, which remained a niche market for years before a surge in popularity in almond milk lifted the entire nut milk category from 5% of the dairy industry to about 15%.

If alternative meat companies follow in those footsteps, analysts are projecting the market will similarly grow to 15% of the $270 billion domestic wholesale meat market, or about $41 billion, in the next decade.

Uber off to rocky start; China tariffs impact stocks

Beyond Meat has generated a lot of consumer excitement around its product by marketing to meat lovers, literally moving veggie patty cases typically relegated to the freezer section to the fresh meat cooler. It burger line is sold in retailers like Whole Foods and Kroger, and on menus at 1,100 Carl's Jr locations nationwide.

It's one reason why investors are willing to overlook the company's underwhelming financials. Beyond Meat generated $30 million in losses just last year on revenue of $88 million, and it will need to continue investing in its operations in the near future. (The IPO raised about $1.5 billion for the company at the IPO's $25 a share price.)

However, experts cite the company's improving numbers. "I'm not sure that getting to profitability in the short term is the right goal," said Alexia Howard, analyst at Sanford C. Bernstein & Co. The company would better benefit from developing a robust supply chain, as well as more products that appeal to mainstream consumers' tastes, Howard said.

"It's the supply side that's constrained right now, not the demand side," Howard said.

First published on May 16, 2019 / 7:01 AM

© 2019 CBS Interactive Inc.. All Rights Reserved.

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