NEW YORK • All it took was a rosy sales outlook to send the shares of Beyond Meat Inc soaring - again.
The faux meat-maker's shares had already quadrupled since its May 1 initial public offering, before jumping as much as 26 per cent in late trading on Thursday, after its first quarterly report came out.
What captured investors' attention was the forecast that sales would exceed US$210 million (S$287 million) this year, beating analysts' estimate of about US$205 million. To put that into perspective, revenue last year was all of US$88 million.
This kind of wild success out of the gate illustrates Wall Street's hunger for markets that are not yet completely mapped out. The excitement here is about the clear increase in demand for food that resembles meat but is not made out of it. The California-based company is benefiting from being one of the first producers on the scene.
And of course, it now faces the challenge of backing up the optimistic projections as competition builds.
Mr Vito Racanelli of Fundstrat Global Advisors predicted the stock would be volatile but said he would not recommend taking a short position - betting that its value will decline. "It remains to be seen how long BYND can keep this growth of over 200 per cent, though likely it will remain strong for some time," he said in an e-mail, referring to the company by its ticker on the Nasdaq Global Market.
Sales are growing as people seek to cut down on meat for health and environmental reasons. The market for meat alternatives could reach approximately US$140 billion and take 10 per cent of the US$1.4 trillion meat market, according to research from Barclays.
But it may take a while for actual profits to materialise. The company reported a net loss of US$6.6 million, wider than the loss of US$5.7 million a year earlier. Losses could continue as Beyond Meat expands distribution, invests in infrastructure and creates new products.
And there are other headwinds. The company's main rival, Impossible Foods, recently announced a roll out with Burger King. What's more, food giants like Tyson Foods and Nestle are working on competing products.
Maybe there will be enough demand for all of them. Americans in Gen Z - an age group that ranges roughly from seven to 22 - are more than twice as likely to classify themselves as vegetarians, vegans or pescatarians than their Gen X or Boomer parents, according to a survey by Bloomberg News and Morning Consult.
Even many of those not cutting meat out entirely are trying to eat less of it, with 26 per cent of Gen Zers saying they are making the effort, more than the nationwide average of 19 per cent, according to market research company Mintel.