[Music] it's a big noisy Universe of stocks out there welcome to goodbye or goodbye our goal here is to help cut through that noise to help navigate the best moves for your portfolio today we're going to take a look at the most nutritious play when assessing protein oriented consumers and I'm here with John bumgardner muho managing director and Senior consumer equity research analyst John good to see you all right so let's start with your first buy here which is an interesting pick and this one is B ring going to walk through some of these these reasons John so the first point here take us through a protein nutrition category growth potential you say yeah so bellering is the leader in the US ready to drink protein sha category it's a$6 billion Doll Market with history of double digit growth uh we're seeing a significant shift in this category historically it was mostly bodybuilders um you know athletes have drinking this category we've seen that shift net more everyday consumers we're now over half of the category it's folks looking for a healthier breakfast meal replacement option so the category has legs on the volume side more households more consumption opportunities we see a range of innovation coming over the next 3 to five years um you know more functional ingredients more specialization that will maintain category growth ahead of the street expectations all right it's not just bodybuilders anymore that's the point second leader in protein nutrition shakes we got a chart here John walk us through that point sure so as you can see me bellering has been Supply constrainted on and off for the past couple of years right now the company has more Supply coming online they growing distribution 20% revenue is also up mid to high teens uh there's more capacity coming online over the next 12 months that will continue to drive household penetration to frame it for you the categor is about half of households out there bellering is in about 15% of households so there's quite a ways to go potential long Runway exactly exactly third bullet point here let's wrap this up potential pass for upside in the stock walk us through a John sure so there's a couple so organically again more supplies coming online over the next 12 months that underscores the volume growth number two Innovation next year we expect new platforms launching after the first of the year in January and then next summer has not been disclosed yet we believe one is a plant protein shake um which could drive new opportunity for growth in the category there uh and then inorganically you know looking at opportunities for Partnerships to build distribution with beverage companies going to the convenience door Channel even potential for a takeout give I wanted I want to stop on that point that was interesting some some colleagues on the street I know they mention this name as a potential takeout Target you agree with that we do I mean this is a category where you've seen about 15 Acquisitions take place just since 2019 uh you know growth is at a premium in consumer staples overall this is a very differentiated category and Premier Protein is one of these brands that has the unique appeal to Lifestyle of consumer so we there's a lot of value in this business and in this category all right before you Pile in though you're listening to this John maybe and they viewers John makes a good point but what are some of the risks you got to think about about John with this one the main risk right now we're seeing this almost every day in earning season is the weak consumer uh you're looking at most of the consumers in this category and that $50 to $100,000 household income around the median for us consumers um so there is risk you could see some softening in the category that being said we believe the downside is limited because this is moving to more of a staple consumption occasion as opposed to discretionary consumption occasion and not only that but the increase in distribution for bellering should support continued volume growth even if the category does soften all right so that's when you like let's move to one you would avoid John here's the name listen a lot of people know it Beyond me uh let's go through the points there the first reason John you would say weakening plant-based meat category we got a chart on this one walk us through this one yeah Josh so the category has been soft you're you know 45 consecutive months now a volume contraction for the category um the rate is improving however we really don't see a real inflection for growth back to the category level over the next six to 12 months that's number one number two beyond meat continues to lose share there's been some excitement over this new beyond meat 4 platform with ingredients reformulation they reduce the saturated fat content they have some accolades now from the Heart Association The Diabetes Association um that being said we believe it takes more than just the nutritional content you have to have more Innovation different subcategories convenient options you know frozen meals to really Drive penetration for this category so you know that's a headwind then number two um yeah let's go through it second Point market shares declining do that that's the market market share issue that we see right now and that's exacerbated by the pricing decisions uh you know cash flow you're seeing you know cash burn about $70 million annualized here in Q2 uh in order to cut that as volumes are declining Beyonds raising prices the raising price is 10 12 133% into a weak category the rest of the categories lowering prices the price gaps are expanding and that continues to pressure market share which is down two points year on year and about six points below the the high back in the summer of 2020 final Point here a capital raise remains likely in your opinion that's right this ties back to the cash burn we're seeing in the company uh $70 million annualized run rate for cash burn we don't think they turn cash positive until late 2025 there's $150 million of cash in the balance sheet exiting Q2 uh we believe there is a real risk of a capital raise here in the next couple of months which could be materially diluted for for Equity holders and you know this stock has been hit so hard already John you don't think a lot of this is already priced in you know it's funny I mean just you know given the the valuation it had post IPO it's still tra at about you know four four and a half times Revenue right now which is double what the package food company trades so I mean you're still putting more of a tech multiple on this company all right so what are the risks you got to think about though for viewers well I the risk would be an unexpected turnaround for the category or for Beyond me you know getting greater traction from this this new ingredient reformulation um it's hard to see because you've got a 10% reduction Outlet sold year on- year for beyond meat globally so you're not really seeing the flow through you on the outlet side or on the the repeat or trial side but the biggest issue would be just expectations being very low and seeing a return to growth sooner than we think all right to wrap this up John for viewers you got a buy on B ring you would say a void Beyond me yes John thank you so much for your time in those picks appreciate it