Wall Street analysts see Beyond Meat shares pulling back

Investing


Ethan Brown, founder and CEO of Beyond Meat, prepares to ring the opening bell to celebrate his company’s IPO at the Nasdaq Market site in New York, May 2, 2019.

Brendan McDermid | Reuters

Wall Street analysts following initial public offerings are normally very bullish, but the first major reports on Beyond Meat are tepid because the stock has just run too far too fast in the weeks following its much anticipated debut.

The major analysts started coverage on the plant-based meat substitute on Tuesday, honoring a typical grace period seen by the underwriting firms and other major analysts. The alternative meat play has more than tripled from its $25 IPO price earlier this month.

“We think the stock’s valuation already factors in a best-case scenario for the company’s growth rate over the next six years without taking into account typical near-term execution risk for early-stage start-up companies,” Credit Suisse analyst Robert Moskow said. The firm started coverage of the stock at neutral.

“We initiate coverage of Beyond Meat with a Neutral rating and $67 12-month price target, implying 16% downside potential,” Goldman Sachs said.

But there was one analyst feeling a bit more confident with an overweight initiation.

“We see many other reasons to be constructive on the shares, including that a) BYND only needs to capture a fraction of this expansive TAM to be successful, b) Beyond is a true disruptor with a differentiated product and a commitment to innovation, c)= the margin upside is underappreciated, and d) at least one major QSR chain likely will become a customer by the end of the year,” J.P. Morgan analyst Ken Goldman said.

Shares of Beyond Meat are up 2% in premarket trading and closed at $79.67 on Friday.

Here are what the analysts are saying about Beyond Meat:

J.P. Morgan- Overweight rating

“We initiate coverage of Beyond Meat with an Overweight rating and a $97 price target. We view Beyond’s growth opportunity as extraordinary: We model a Total Addressable Market (TAM) for plant-based meat in 15 years of $100B, up to 100x larger than today’s. And we think Beyond’s sales ultimately could exceed $5B versus $88MM last year (though our price target does not rely on this). We see many other reasons to be constructive on the shares, including that a) BYND only needs to capture a fraction of this expansive TAM to be successful, b) Beyond is a true disruptor with a differentiated product and a commitment to innovation, c)= the margin upside is underappreciated, and d) at least one major QSR chain likely will become a customer by the end of the year. All in, we are strongly favorable on the story and see 21% upside to our DCF-based price target.”

Goldman Sachs- Neutral rating

“We initiate coverage of Beyond Meat (BYND) with a Neutral rating and $67 12-month price target, implying 16% downside potential. We see BYND as a key early-mover in the nascent and rapidly evolving plant-based protein market, where innovations in ingredients, manufacturing processes, and formulations are disrupting the largest category in food (~$270bn in US and >$1tn globally). BYND is still the early innings of this transformation and is achieving notable scale on manufacturing, brand awareness, product innovation, and distribution. Recent Nielsen scanner data, in particular, has remained strong and the pace of sizable new distribution additions (including Tim Horton’s Canada for Beyond Breakfast Sausage, Canada Retail, and Netherlands Retail in the past 30 days) suggest strong sales momentum in 2019-20, where we forecast $214mn/$353mn (+143%/+65% Y/Y) of revenues, with upside optionality from additional large QSR wins and more rapid international expansion in the near-term.”

Credit Suisse- Neutral rating

“We are initiating coverage of Beyond Meat at Neutral and a $70 target price. We have strong conviction that Beyond will maintain leadership of the plant-based fresh meat category as it carves into a big portion of the US meat industry. Beyond’s R&D capabilities, purpose-driven branding, and early inroads with top restaurants and grocers give it a significant head start in this high-potential market. However we think the stock’s valuation already factors in a best-case scenario for the company’s growth rate over the next six years without taking into account typical near-term execution risk for early-stage start-up companies.”

Jefferies- Neutral rating

We initiate coverage of BYND with a Hold rating and $85 PT. BYND’s strong leadership, growing brand equity, and favorable secular tailwinds for plant-based proteins w/in the large $1.4T global/$270B U.S. meat industry positions the co. well for rapid and sustainable growth. Yet, at ~11x FY21 EV/sales, expectations are very high and likely require bull case developments (e.g., McDonald’s in QSR) to support the stock, keeping us on the sidelines. “

Bank of America- Neutral rating

“We are initiating coverage of Beyond Meat (BYND) with a Neutral rating and $85 PO. BYND is a food manufacturer of novel plant-based meats. The company developed an innovative set of ingredients and manufacturing processes that effectively convert plant based materials into meat products without involving animals. We are optimistic about the prospects for BYND given the size of the addressable market, product quality, and positioning against consumer interests in health & wellness and sustainability. BYND shares have appreciated ~240% since its IPO and carry a current value of $4,906m, which is 16x our FY20E revenue estimate. Our $85 PO is based on assuming BYND can sustain an 8x EV/Sales multiple on FY23E discounted back to today and a net present value of our FY29E free cash flows.”



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