MeaTech 3D’s Bull Case
In these speculative times we’ve seen stocks plummet to 52-week lows with absolute ease. Look at Amazon, Paypal, and Meta– these overpriced stocks have all declined drastically from last year’s highs, and could see further corrections coming. However, there are also companies like Nestle that although are declining now, could see a strong reversal soon. That is why after recently reviewing a research report conducted by Zacks Small Cap Research, I found a small cap stock that I think could see a strong reversal and provide bullish returns yet has an innovative and sustainable spin. Meet MeaTech 3D (NASDAQ:MITC).
MeaTech 3D is a food technology company that seeks to produce food products and technologies that provide an alternative to industrialized animal farming.The company hopes to develop a modular factory design which will be able to offer a sustainable solution for producing a variety of beef, chicken and pork products, both as raw materials and whole cuts. They’re planning to operate as both a B2B and B2C platform once they can generate at mass production levels. MITC made a name for itself as the first US-listed cellular agriculture company, though it has shed over 50% of its value since its March 2021 listing.
As the Zacks SCR report indicates, MeaTech 3D was just given a price target of $14.00, up from its current value in the $4–5 range. A projected increase of over 200% suggests that MeaTech 3D is not some simple R&D project that is priced on potential only. Rather, MeaTech 3D is a disruptive cellular agriculture company that could revolutionize the farming industry. This can be seen in their aggressive M&A strategy that has touted accomplishments such as the recent acquisition of Peace of Meat, a production plant based in Belgium. By purchasing this production plant MeaTech believes they are on the cusp of mass production and revenue production. According to Zacks this will begin with a projected $1.25 million USD in Q1 2023, and $24 million USD by end of year 2024.
Furthermore, I would like to highlight a few other important aspects not found in the report itself but are instrumental to the growth of the food tech industry as a whole. When analyzing an industry like food tech, analysts often get overly concerned with the size of the cultured meat market. According to ReasearchAndMarkets.com, the global cultured meat market grew from $110.1 million in 2020 and is only projected to reach $275 million by 2025. However in a McKinsey report the projected market is supposed to reach $25 billion dollars by 2030 (figure 1.1). The Mckinsey analysis incorporates factors such as protein consumption and higher household income which Market and Research does not. Then there is the additional macro-factor of global demographic growth, which is expected to create another billion mouths that need to be fed by the decade’s end. These interrelated factors indicate that the global cultured meat market can expect robust growth metrics moving forward in the intermediate and long-term outlooks.
Another important element to consider is sustainability. As companies begin emphasizing ESG as necessary requirements for investments, the food tech industries are witnessing a significant increase in investment and funding in this direction. Companies and countries have been increasing ESG investment YoY (figure 1.2), and that trend could very well be occuring in the farming industry. Compare the uptick in consumer interest in cultured meats with the desire to go from gas powered cars to electric vehicles, the cultured meat industry could see an influx of funding within the next few years. With growing numbers in deforestation, greenhouse emissions, waste and pollution, concerned investors should already be building a strong case for investments in food tech over industrial farming (ESG concerns 2022), and MeaTech stands as a prime beneficiary of this broader market trend.
For all of these reasons, I do think the Meatech 3D price target could very well reach its target price of $14.00 per share. Although metrics like nonexistent revenue, high cost for R&D, no product release, investors should see these as temporary/short-term obstacles and look optimistically for some of the longer-term valuation metrics: decrease in production cost, increase in name brand partnerships, and product creation. In conclusion, there are many reasons to consider investing in the food tech industry as a whole and more specifically MeaTech 3D. Whether it be a strong projected outlook or a more holistic approach of minimizing greenhouse emission, MeaTech 3D could soon be returning investors with strong returns.