The alternative meat industry could be worth $40.5 billion in the next decade, Bernstein said in a note Tuesday.
If the alternative meat category follows a similar path to plant-based beverages, like the rise in popularity of almond milk, the industry will boom, giving newly public company Beyond Meat a great opportunity, the firm said in an investor note.
Bernstein said if Beyond Meat, known for its flagship product the Beyond Burger, can secure a 5% market share, up from 2% today, this would imply sales of $2 billion in 2028. Beyond Meat's sales in 2018 were $88 million and in 2019 were $207 million.
In the strongest market debut of the year, Beyond Meat went public on the Nasdaq onThursday. The maker of plant-based meat substitutes was priced at $25 a share and surged 163% on its first day of trading.
Bernstein's buy recommendation is the first rating for Beyond Meat by a major Wall Street firm. Bernstein initiated coverage of the alternative meat company as outperform with a one-year target price of $81.
Although Beyond Meat is now unprofitable, Bernstein expects improvement in the next three to five years as the company gains scale. Bernstein applied a 7 times sales multiple to Beyond Meat's full-year 2023 estimated sales and discounted it back at an 8.5% rate to reach its target price.
Beyond Meat is not the only alternative-meat making competitor in the space. Impossible Foods is staking out its turf in the restaurant space and food giants Tyson Foods and Nestle are trying to get into the industry. Bernstein said escalating consumer demand means it is likely multiple brands can thrive.
Beyond Meat stock was up 3.6% in Tuesday's premarket, a day after surging nearly 12% to close at $74.79 a share. The shares are up almost 200% since its IPO.