As the latest plant-based food company to go public, many people might now be wondering if Oatly (NASDAQ: OTLY) is a good investment. Whilst you can find a ‘First Look’ analysis of the popular oat milk company on our app, we thought it might be a good idea to compare the two hottest names in the plant-based food market. So, which is a better investment Beyond Meat (NASDAQ: BYND) or Oatly?
Bull and bear case for Beyond Meat
Over the past year, there has been a large increase in restaurants and fast-food chains adding Beyond Meat products to their menus. Dunkin, Del Taco, A&W, and TGI Fridays all feature at least one Beyond Meat product. With restrictions eased, foodservice revenue should now grow at pace.
Beyond is currently moving full steam into China’s huge market. The company opened its first end-to-end manufacturing plant outside of the U.S. last quarter and it is looking to tap into the pork market. China eats twice as much pork as the EU and after an outbreak of swine flu last year disrupted the pork market, many people will be looking for an alternative. Beyond Meat has developed crunchy pork alternatives and ramen toppings to suit the Chinese market.
Beyond Meat’s stock has climbed 40% in the last 2 weeks. Whilst this might seem good for investors right now, it is prudent to be wary of a corrective dip, particularly as this is the latest company to be caught up in the Reddit short-squeeze saga.
Beyond is now facing serious competition, such as Impossible Foods, Tyson Foods, and many other local alternatives. Beyond Meat did have a first-mover advantage, but this has rapidly dissipated over the last year.
Furthermore, Q1 revenue and profits missed targets, concerning investors. Q1 was supposed to be the quarter that showed Beyond’s strength after the pandemic restrictions eased. Yet, its earnings report saw retail sales jumping 28% year-over-year (YoY) whilst its foodservice revenue fell 26% (YoY). Now Q2 needs to show some promise on the foodservice side, or investors might start to get spooked.
Bull and bear case for Oatly
Oatly has made a name for itself coming from the hipster coffee scene, straight into the mainstream refrigerator. It now sits as an increasingly popular product in the plant-based alternatives market. With its planet-conscious, health-conscious outlook, this stock is definitely one for the current era.
In Sweden, where this company is headquartered, Oatly holds a whopping 72% of the market share for milk alternatives. In the U.S., it only holds 4% of the market. But oat milk is on the rise and as a market, it is expected to grow at a compound annual growth rate of 9.8% from 2020-27. In 2020, the global oat milk market was valued at $3.7 billion.
Furthermore, in 20 countries worldwide, the company sold $421.4 million worth of products throughout 2020. This is an increase of 106% from 2019. Its products are available in 7,500 shops and more than 10,000 cafes across the U.S.
Oatly’s shareholders include celebrities such as Oprah Winfrey, Jay-Z, and Natalie Portman, as well as former Starbucks CEO, Howard Schultz.
Yet, despite all this, the company is currently operating at a loss, with its total loss for 2020 coming in at $60.4 million which is almost a 70% increase from the year before.
Despite Oatly’s success, the company is still operating at a loss. Its total loss for 2020 stands at $60.4 million, just about doubling the $35.6 million loss of 2019. In the filing, the company says it believes it can become profitable as it increases its production capacity and continues to expand globally.
Furthermore, big retailers such as Walmart will force the price of its milk down whilst the proliferation of the Oatly brand will have to fight off competition from long-established alternatives such as Califa Farms and Alpro, whilst also competing against new, and local brands; as is the case with Beyond Meat right now.
So, which is the better investment?
Both stocks are a little risky right now, but, Beyond Meat has the advantage of showing some profitability, as well as U.S. brand awareness. For stocks that are newly public, it is always a good idea to keep them on a watchlist for at least two quarters and re-evaluate if you want to invest.
Oatly is a promising stock, but only time will tell if it is a good investment. For now, Beyond Meat remains the top dog and presents a better investment opportunity.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
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