AppHarvest Investment Thesis

The US has a long list of challenges to address. Income inequality, hunger, the rise of obesity-related health conditions, sustainability, and an alarming scarcity of water in certain regions have many worried about the future.

AppHarvest is taking on the momentous task of building long-term solutions to these issues – not one at a time, but all at once – and the stakes couldn’t be higher. According to management, now is the time to take decisive action on these critical issues, and AppHarvest intends to lead the way. 

So, what does AppHarvest do? And how can like-minded investors get involved? Are there profits to be made now or in the future? 

The answers to these questions require a closer look at the company – its strategy, structure, obstacles, opportunities, and the underlying AppHarvest investment thesis. 

What Does AppHarvest Do?

AppHarvest Founder & CEO Jonathan Webb didn’t think twice about creating a new kind of company capable of achieving audacious goals. After all, he’s gone after big goals before.

Most recently, he was part of the US Department of Defense team tasked with making huge advances in the use of renewable energy on military installations.

However, Webb’s true passion is the well-being of his friends and neighbors at home in Eastern Kentucky, so he decided to turn his attention to transforming Appalachia into an AgTech leader. 

That’s where AppHarvest comes in. At its most basic, AppHarvest is growing fruits and vegetables, but that doesn’t begin to describe the company.

AppHarvest farms are indoor operations, which means they can grow food year-round. That increases the availability of fresh produce that doesn’t need to be shipped in from hundreds of miles away. 

AppHarvest relies on recycled rainwater for irrigation, and it uses a state-of-the-art system to maximize efficiency. As a result, the company boasts water usage that is 90 percent lower than that of traditional farms.

It doesn’t use harsh chemicals to keep pests away. Instead, each indoor farm has a healthy ecosystem that welcomes bees and discourages harmful critters from damaging crops. 

To date, AppHarvest has 60 acres-worth of indoor farms, and acre-for-acre, the company is generating 30 times more food than peers who are using traditional methods.

In addition, AppHarvest is dedicated to the economic revitalization of Appalachia now and for generations to come. It is training future leaders to continue the movement towards putting Appalachia on the map as the nation’s AgTech leader. 

In short, Webb is harnessing cutting-edge agricultural technology to bring innovative solutions to what once appeared impossible problems. Along the way, he is keeping sustainability top-of-mind. 

In What Economic Conditions Will APPH Thrive?

AppHarvest just started trading publicly at the end of January 2021, and it doesn’t have any profits to speak of – yet. In fact, for 2020, the company saw a net loss of $17.4 million. However, investors and management aren’t concerned with that number, because the company hadn’t yet harvested a crop. 

The first harvest took place in January of 2021 and boasted produce from 40-foot tall tomato plants. That made it possible for the company to make a large donation to local food banks right away.

AppHarvest’s primary facility is expected to see up to 40 million pounds of tomatoes each year going forward – these will be supplied to local schools and the larger community at an affordable price. 

AppHarvest is located in an area known for the scarcity of access to fresh, healthy food. In addition, good jobs are hard to come by, and few have the opportunity to build any sort of wealth.

AppHarvest’s operation is expected to boost the local economy significantly, and not just because the jobs pay 41 percent more than average. There will be a need for housing and other services associated with increased economic activity. 

In other words, AppHarvest is in the right place, at the right time, during the right economic conditions to see strong growth in coming years. Further, the strong likelihood of more natural disasters and additional water challenges in farming regions promises to make AppHarvest a go-to partner in securing the food supply chain – and that means increased revenues and eventual profits for shareholders. 

What Challenges Is AppHarvest Tackling?

AppHarvest doesn’t face the typical obstacles traditional farmers must overcome – for example, weather and access to water. However, as a new company attempting to disrupt a massive industry, there is a long list of obstacles that AppHarvest will have to sort out. 

AppHarvest has all of the challenges that any startup faces, as well as the complexities of implementing new technology, workflow, and supply/distribution chains.

The indoor farms rely on an extensive network of digital monitoring systems that include hundreds of sensors to maintain the optimal climate for growth, and that’s just the beginning.

The list of technological tools required for success is thousands of items long. Any of these may prove unreliable or impractical, requiring management to revisit and adjust accordingly. 

What Tailwinds Does AppHarvest Enjoy?

The good news is that AppHarvest isn’t the first in the world to attempt this type of agriculture. Indoor vertical farming is widespread in the Netherlands, and its success has made that tiny country the second largest food exporter in the world.

AppHarvest has strong partners in the Netherlands who are fully prepared to provide support and guidance, as well as financial backing from many high-profile investors. 

Meanwhile, there is significant demand for a reliable food supply, and interest in sustainability is growing fast. According to many, the effects of climate change appear to be showing in wildfires, hurricanes, and historic deep freezes that regularly disrupt the production and transportation of food. 

Is AppHarvest a Good Investment Long Term?

AppHarvest is Public Benefit Corporation and a certified B-Corporation. That means unlike a typical corporation, AppHarvest’s primary duty is not to its shareholders. Certainly, AppHarvest intends to generate profits and share those returns with its shareholders.

However, it also has a responsibility to other stakeholders, like employees, consumers, and the community. The B-Corporation certification is a bit different. This means  AppHarvest is recognized for its social and environmental performance. 

AppHarvest is taking a unique approach to solving difficult problems, and that means there is risk to investors. However, from nearly every perspective, the model and methods AppHarvest uses will be mainstream at some point, since current farming methods aren’t sustainable over the long-term.

Those who invest in AppHarvest now are likely to see long-term growth as the company expands its own business and starts a movement towards more reliable and responsible food production. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.