Analysts Think Cultured-Meat Leader Steakholder Foods (STKH) Is Massively Undervalued

December 09, 2022 at 13:31 PM EST

Steakholder Foods Ltd. (NASDAQ: STKH), formerly MeaTech 3D Ltd., is a food technology company that is transforming the global meat supply chain. Steakholder is the world’s first publicly listed cultivated meat company, using innovative 3D bioprinting and tissue engineering technology to improve meat quality and taste. The company’s goal is to produce high-quality real meat on a sustainable basis and to replace industrialized livestock breeding, minimizing the environmental impact of livestock farming and offering more nutritious, hygienic, and safer food options.

Steakholder recently reported third-quarter financial results that were broadly in line with Zacks expectations. Steakholder stock is down 67% YTD, which is not surprising given that the business is still in its infancy and acceptance of alternative meat is still low. The company continues to make considerable investments to expand its cultivated meat technology capabilities, with R&D expenses totaling $2.8 million in the third quarter, up 40% year-over-year. The loss in the quarter came to $0.017 per share, which was slightly better than Zacks’s forecast for a loss of $0.03 per share. The operating loss was $2.5 million compared to $3.9 million the previous year, and cash and cash equivalents at the end of the third quarter came to $11.2 million.

In an updated analysis, Zacks analysts revised the stock’s price estimate to $8-$9, suggesting the company is deeply undervalued at the current price range of around $1.75.Zacks #1 ranked stocks have consistently outperformed the market in the past, with an average annual gain of +24.51% since 1988. According to a previous Zacks report, Steakholder’s revenue in 2030 could exceed $500 million if the company is successful in gaining a 2% market share of the cultured meat market, which is expected to reach $25 billion by 2030. This favorable analyst rating and company development will pique the interest of Wall Street and other major food technology companies, which will benefit Steakholder in the long run.

Favorable analyst ratings can go a long way in helping Steakholder attract not just retail investors but also institutions. With the company seemingly undervalued according to Zacks, it would not come as a surprise if a few Wall Street firms begin coverage of the company in the next few quarters, thereby paving the way for Steakholderto become a popular name among active investors.

Despite the positive outlook, the stock has underperformed, and the primary reason is that investors are hesitant to enter the previously tried-and-failed market. Plant-based replacements for animal products are not new; in fact, they were developed in the early 19th and 20th centuries; nevertheless, producers were unable to replicate the flavor and texture of meat with these products. Despite substantial advancements in meat substitutes that are highly effective in simulating animal-derived meat, most people are still hesitant to test new food products. According to a survey conducted by the International Food Information Council in the United States, 74% of respondents would prefer conventional animal protein over cell-based meat. However, in the last two years, the market has seen a shift in consumer dietary choices, as consumers’ concerns about animal welfare and sustainable food production have grown. With the increased need for lowering carbon emissions associated with livestock, cultured meat has been recognized as one effective sustainable meat alternative. Cultured meat is derived from animal muscle tissue, but it still depends on livestock production, which is the major downside of this technology. Steakholder is attempting to address this challenge with tissue engineering technology, which will aid in alleviating environmental issues as well as advocate animal welfare.

Steakholder’s technology is key to the cultured meat revolution as it has the potential to be the technological enabler for large corporations globally. The company is focused on expanding globally to establish itself as the go-to technological enabler of the alternative meat revolution.

Steakholder Foods and Umami Meats, a Singaporean cultured seafood startup, signed a memorandum of understanding in July 2022 to collaborate on the development of 3D-printed cultured structural seafood as well. The collaboration gives the company access to the Asian market. Because Singapore is the only Asian country that has legalized the production and distribution of lab-grown meat, the agreement presents a massive opportunity for both companies. Singapore is heavily reliant on imports for 90% of its food, importing food from more than 170 countries which makes its food safety vulnerable to food shortages and inflation. In 2019, Singapore announced that it aims to be 30% self-sufficient by 2030 by increasing the local production of fruits, vegetables, and eggs, as well as alternative proteins. The country is aggressively investing in the production of cultivated meat, offering growth opportunities for market participants.

Peace of Meat, a Belgian cultured avian company acquired by Steakholder in 2021,announced in July 2022 the establishment of a stable and unique avian cell line. Peace of Meat plans to commercialize its products in the emerging hybrid food market, which combines plant-based ingredients with cultured avian biomass. The company has already signed a joint development agreement with ENOUGH, an ingredient company that produces protein by fermenting fungi, known as mycoprotein. Peace of Meat aims to create game-changing hybrid alternative meat products with this collaboration.

The U.S. market is gradually embracing cultured meat as well, which could be an inflection point for this industry as the U.S. is often considered the frontrunner in embracing new technologies. The FDA recently approved a cultured chicken of Upside Foods, making it the first cultured meat company to get FDA approval. The authorization bodes well for other industry leaders including Steakholder Foods and is a positive step toward production and distribution in the United States.

Steakholder Foods is making headway in developing high-quality, structured, 3D-printed alternative meat. Given the company’s growth potential and the favorable industry outlook, Steakholder offers a unique investment opportunity for investors.

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