Benzinga’s weekly Stock Wars pits two industry leaders against one other in an attempt to determine which firm is the better investment.
This week’s battle pits two vegan food companies: Beyond Meat Inc (NASDAQ: BYND) and Tattooed Chef Inc (NASDAQ: TATT) (NASDAQ: TTCF)
The Case Against Meat: This company, situated in El Segundo, California, was launched in 2009 and quickly gained notoriety thanks to famous investors such as Leonardo DiCaprio and Snoop Dogg. The company’s initial public offering (IPO) in 2019 was priced at $25 per share and was a huge success.
Earlier this year, the company partnered with PepsiCo, Inc. (NASDAQ: PEP) to produce plant-based protein snacks and beverages, as well as a plant-based burger with McDonald’s Corporation (NYSE: MCD).
However, its track record in becoming a staple of the grab-and-go dining crowd has been shaky: an attempt to roll out plant-based chicken nuggets with Yum! Brands, Inc.’s (NYSE: YUM) KFC chain never progressed beyond the pilot phase, and a plant-based breakfast-sausage sandwich offered by the Dunkin’ chain was scaled back from a national availability to a few hundred eateries due to a lack of custodial
Beyond Meat launched its third attempt to introduce a plant-based chicken product earlier this month, but it’s only available in individual eateries and smaller regional chains.
Panda Express said on Tuesday that it would offer Beyond Meat’s Original Orange Chicken at certain locations in New York City and Southern California for a limited period.
During the pandemic, the corporation had a tough spell, with consecutive quarters of losses. Although Beyond Meat is making a renewed push to become more visible in supermarkets, most notably by getting its sausages and meatballs into thousands of Walmart Inc (NYSE: WMT) stores this spring, a focus on getting products into the food service industry rather than concentrating on a grocery retail presence didn’t help.
It’s also gotten some odd press recently. Members of the Reddit community WallStreetBets regularly praised the business’s potential in May, and it also drew a prominent detractor in Jim Cramer, who sent a series of tweets urging bears to liquidate their short positions in the company. And, as CEO Ethan Brown revealed to the Wall Street Journal earlier this month, the company is still working on making its vegan alternatives indistinguishable from animal protein.
Beyond Meat reported $108 million in revenue in the first quarter, up from $97 million the year before, but a gross profit of $32.7 million, down from $37.7 million the year before. It made a net loss of $27.3 million, or 43 cents per share, and an adjusted net loss of $26.2 million, or 42 cents per share. The adjusted EBITDA loss in the first quarter was $10.8 million, or -10 percent of net revenues.
The business also provided second-quarter forecasts, predicting net revenues of $135 million to $150 million, up 19 percent to 32 percent from the second quarter of 2020.
“We have lately began to notice a modest thaw emerging within food service both nationally and in select international markets,” Brown said, adding that Beyond Meat was “cautiously resuming to the practice of offering guidance, starting with net revenues.”
At the time of writing, Beyond Meat was trading at $127.97, which was slightly down than its 52-week high of $221.00.
The Case Against the Tattooed Chef: This Paramount, California-based firm was created in 2018 and was previously known as Itella International before becoming public last October following a merger with Forum Merger II Corporation, a special purpose acquisition company.
Tattooed Chef, unlike Beyond Meat, is not attempting to establish a presence on fast-food restaurant menus or supplying plant-based replacements to cattle, chicken, or port.
Instead, its ready-to-cook bowls, zucchini spirals, riced cauliflower, acai and smoothie bowls, as well as plant-based pizzas and cauliflower pizza crusts, have been sold in frozen food sections of supermarkets across the United States.
On July 12, the company announced that its products will be offered later this summer in 1,800 Kroger Co (NYSE: KR) shops across the country. It had previously acquired product placements at Target Corporation (NYSE: TGT) in March and Whole Foods, Amazon.com, Inc.’s (NASDAQ: AMZN) grocery subsidiary, in May.
In May, the business finalized the $37 million purchase of New Mexico Food Distributors Inc. and Karsten Tortilla Factory LLC, known as Foods of New Mexico. The company had launched its first national advertising campaign on television and digital media platforms a month prior to build brand awareness.
Tattooed Chef reported $52.7 million in revenue in the first quarter, up from $33.2 million the year before, thanks to an increase of $18.4 million in Tattooed Chef-branded items and a $1.3 million rise in private label and legacy products for select private label merchants.
The company’s first-quarter gross profit was $13.7 million, up from $9.2 million the year before, while its net loss was $7.9 million, up from $5.9 million in the same period in 2020, due to higher operating expenses, according to the company. The company forecasted a full-year revenue range of $235 million to $242 million and adjusted EBITDA in the range of $2 million to $4 million, down from $7.4 million a year ago.
“With the Tattooed Chef brand, we’re reinventing plant-based dining by tapping into consumer tastes and always bringing new concepts to market,” said Sarah Galletti, chief creative officer and the company’s name’s well-inked inspiration. “Our recent retail product launches have been incredibly successful, and we now have a pipeline of over 250 plant-based innovation concepts, including ambient goods and snacks, thanks to the inclusion of our expanded manufacturing capabilities with the Foods of New Mexico acquisition.”
At the time of writing, Tattooed Chef stock was trading at $19.54, halfway between its low point of $12.61 and its high point of $28.64.
The Bottom Line: The two businesses are approaching their markets in quite different ways. Beyond Meat is definitely taking the riskier route by introducing plant-based dishes to fast-food establishments that have traditionally not been vegans’ preferred grazing grounds. Increasing the focus on gaining access to grocery merchants should assist to boost income.
Beyond Meat admits pandemic-era concerns with the food service business had affected its recent financial performance; Tattooed Chef is playing it safe by not trying to reinvent the hamburger and fully ignoring the food service sector in favor of grocery retailing.
Tattooed Chef’s track record is, admittedly, a work in progress, but a flurry of positive news events might send its stock soaring even higher. It appears to be on the right track as a vegan food firm, especially given Galletti’s statements about a large pipeline of prospective new items and its pursuit of private label ventures, which will likely endear it to major supermarket shops looking to expand their vegan offerings.
Brown’s Wall Street Journal interview was a PR blunder for Beyond Meat. He displayed a level of candor and honesty that many CEOs avoid, but some of his remarks appear to reveal a leader grasping when he should be clutching, to use a phrase from film critic Andrew Sarris.
Tattooed Chef, on the other hand, has only had a single, brief mention in the Wall Street Journal, indicating that the firm, which has only been publicly traded for nine months, still has time to identify itself for an investor audience that is unfamiliar with it.
Tattooed Chef is the under-the-radar surprise in this Stock Wars battle who is ready to become a sector leader. While Beyond Meat is unquestionably deserving of attention, traders and long-term investors should keep an eye on Tattooed Chef’s success.
Photo credit: Flickr / Forth With Life Creative Commons is a creative commons license.
(c) Benzinga.com, 2021. Benzinga does not offer financial advice. All intellectual property rights are reserved./n
