While innovations often center on obvious trends such as artificial intelligence, advancements can occur in even the most mundane places, which brings us to food tech stocks. In a nutshell, food tech refers to discoveries that help process food or improve food ingredients’ functionality. With Generation Z focused heavily on sustainability protocols, investors will need to keep a watchful eye on food technology stocks.
For example, one of the top Gen Z trends is the consumption of plant-based foods. According to a study led by foodservice provider Sodexo (OTCMKTS:SDXAY), 81% of college students will choose a plant-based offering when it’s the default option. Of course, different surveys will bring up nuanced angles. But the broader point is that young folks readily accept sustainable choices when offered.
Moving forward, as more members of Gen Z continue to enter the workforce, their opinions will matter the most. Since they’re voting with their dollars, it behooves investors to consider the below food tech stocks.
Kroger (KR)
When you think of food technology stocks, chances are, Kroger (NYSE:KR) is not what you had in mind. However, it’s a surprisingly holistic idea as far as digital innovations are concerned. For example, in a bid to cut down on fraud at self-checkout kiosks – by entering a code for a cheap item and swapping it in the physical realm with an expensive item – Kroger turned to AI to help crackdown on these low-level fraudsters.
As for the core concept of food tech stocks, Kroger offers the Simple Truth brand. Offering options encompassing organic, gluten-free, and plant-based categories, the grocery giant serves customers with a more refined taste. That includes Gen Z, members of which often gravitate toward “fake” meat products. Plus, through the Simple Truth umbrella, Kroger can undercut pure-play plant-based food manufacturers.
On the financial front, Kroger is really attractive for its forward earnings multiple of 10.68X. That’s lower than almost 80% of its peers in the retail defensive industry. Lastly, analysts rate shares a consensus moderate buy with a $51.20 price target, implying over 11% upside potential.
Archer Daniels Midland (ADM)
One of the most important names in the broader food value chain, Archer Daniels Midland (NYSE:ADM) is a multinational food processing and commodities trading corporation. Per its public profile, Archer Daniels Midland operates more than 270 plants and 420 crop procurement facilities worldwide. But despite its relevancy, ADM lost a sizable amount of market value in the past 52 weeks. Still, this dynamic could change.
Fundamentally, ADM represents a key player among food tech stocks thanks to its alternative and plant-based proteins division. According to its website, the company is a leader in delivering tailored approaches to protein-forward formulation development. Put another way, ADM offers a business-to-business model, providing ingredients and services to well-known food brands. If you’re eating it, there’s a good chance AMD could be behind it.
Like Kroger above, Archer Daniels Midland offers a compelling discount to prospective investors. Currently, shares trade at 10.16X forward earnings, below the sector median 14.78X. Analysts also appreciate it for its relevance to Gen Z trends, pegging it a moderate buy with a $91.60 price target.
Oatly (OTLY)
Easily the riskiest idea for food technology stocks on this list, Oatly (NASDAQ:OTLY) is a Swedish food company that produces alternatives to dairy products from oats, including oat milk. Fundamentally, Oatly aligns with a massive total addressable market. About 65% of the human population has a reduced ability to digest lactose after infancy. So, diary alternatives represent a must for these consumers.
Further, millions of Americans don’t even know that they have lactose intolerance. Even better for Oatly (on a cynical basis), the symptoms of the condition can start during childhood or adolescence and they tend to get worse with age. Also, many folks don’t develop symptoms until later in life. So, whatever is the total addressable market now could get bigger in the years ahead.
So, why aren’t more investors clamoring over each other to buy OTLY stock? Just look at its chart – it’s super risky. Plus, Oatly needs to start demonstrating a consistent path to profitability. That said, analysts rate shares a strong buy with a gargantuan $2.41 price target. If you want high-flying food tech stocks, OTLY could be it.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
