How Does The Crypto Crash Affect The Stock Market?

How Does The Crypto Crash Affect The Stock Market?

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It’s been a rough couple of weeks for the stock market, but it’s been just as bad for cryptos.

With the likes of Bitcoin, Ethereum, and Litecoin all plunging in value — not to mention the disaster that was Terra LUNA — we chat about how the recent crypto crash could have a knock-on effect on the stock market too.

In this episode, we also discuss:

  • Good earnings reports from Duolingo and Sea Limited.

  • Why Disney's stock has fallen back to 2015 levels.

  • And elevator pitches for eXp World Holdings and Beyond Meat.
     


Beyond Meat Notes:

Beyond Meat is a pioneer in the plant-based meat market — widely regarded to be the first company to launch a vegetarian burger that both looked and tasted like meat. Their Beyond Meat Burger was first launched in early 2016, followed shortly afterward by Impossible Food, which launched its version in July.

Beyond Meat was founded in 2009 by Ethan Brown who worked with scientists from the University of Missouri to develop the process of turning plant proteins into a basic structure that mimics that of animal protein. Beyond Meat licenses the process from the University.

Over the years, the company has launched a number of new products including sausages, chicken, and jerky. They have also updated the original burger recipe multiple times. The company relies on a number of proprietary processes (unpatented) and formulations.

Beyond’s life as a public company got off to a great start with a lot of buzz surrounding the business and its impressive marketing campaigns.

At the time, I believed that this hype would subside over time. This was due to a number of factors

  1. Beyond Meat burgers weren’t actually much healthier than regular beef patties  — particularly given the high levels of sodium
  2. Beyond Meat’s products were substantially more expensive than traditional animal products
  3. People were probably willing to try the products to test the “tastes just like meat” claim, but would be put off by the price factor for more habitual consumption.
  4. Beyond Meat’s products were highly processed

Though the company has had a number of successes in recent years, particularly in terms of major partnerships with the likes of McDonald's and Yum Brands, I believe that the above thesis is now fully playing out.

However, with the stock down ~90% from all-time highs, it may well make a good investment today.

For a long time, Beyond’s primary competition was Impossible Foods, which contains GMOs. Now, the company is facing increased competition from Smithfield Foods, Tyson, Nestle, Morningstar Farms, Hormels, Maple Leaf Foods, and Gardein — all of which now have some plant-based meat options. It is worth noting that Impossible Foods and Beyond Burger are both typically preferred on taste tests, but it shows how quickly larger companies have been able to enter the market.

Impossible Foods has a distinct disadvantage to Beyond because its products contain GMOs, which are banned in Europe and avoided by many consumers (~46%).

Many restaurants sell Beyond’s products and promote them using the brand name demonstrating strong brand awareness. However, McDonald’s called its PBM offering, which was developed with Beyond Meat, the McPlant. It has agreed to make Beyond Meat its supplier for the McPlant in US and International markets. However, this doesn’t include licensee markets like China.

Environmentally, a study conducted by the University of Michigan shows that compared with a beef burger, the Beyond Burger generates 90% less greenhouse gas emissions, requires 46% less energy, and has 99% less impact on water scarcity and 93% less impact on land use.

Financials:

  • $1.7 billion market cap (down ~90% from all-time highs)
  • Revenue of $465 million in 2021 (14% growth)
  • Revenue of $407 million in 2020 (37% growth)
  • Revenue of $298 million in 2019 (239% growth)
  • However, in the last quarter, they actually posted a decline in revenue due to lower demand, higher trade discounting, and loss of market share!
  • Margins have totally collapsed in recent quarters 0.2% gross margins from 31.7% a year before.
  • S&G doubled in the last quarter to $66 million
  • S&G doubled in the last quarter to $66 million
  • This is being blamed on price decreases and the launch of Jerky
  • Spends ~10% of revenue on R&D

Thoughts:

  • The global Meat Market is worth about $1.5 trillion. However, that’s not really BYND’s TAM.
  • Whole cuts of meat aren’t yet in BYND’s market.
  • Ground meat products are less than $500 billion.
  • PBM currently accounts for about 1% of that.
  • Where that goes in the next ten years is hard to determine.
  • 5% = $25 billion market.
  • 10% = $50 billion market.
  • What percentage of that could BYND reasonably expect to capture?
  • McDonald's is reporting strong demand for McPlant in Europe
  • The company could potentially capture 10-15% of the total PBM market based on brand and superior product.
  • Heavily investing in growth right now but must get costs under control.
  • Should they be able to scale with similar cost structures as peers, shares could be worth between $3-6 billion (depending on the market share of PBM). 

Rory's Verdict:

Too early to call, but a potential 'Buy' in the future.

JamesJames

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