Companies and Brands

Why Analysts Are Mixed on Beyond Meat Stock

Chris Lange

Published: May 21, 2020 1:54 pm

Beyond Meat, Inc. (NASDAQ: BYND) has been one of the top performers on Wall Street since the COVID-19 pandemic hit. In fact, Beyond Meat stock is back above its February highs. For the most part, analysts are chasing this plant-based meat producer higher, but there are a few critics.

While the Dow Jones industrial average and the S&P 500 have bounced back 7% and 9%, respectively, over the past month, Beyond Meat stock has rallied a whopping 65%.

Also Beyond Meat recently inked a deal with Starbucks (NASDAQ: SBUX) in an effort to bring its plant-based meat to China, and this has only encouraged investors.This partnership is huge for a couple of reasons. First, China is a largely untapped market, and second, Starbucks has one of the largest business footprints in the world.

Overall, the prospects for Beyond Meat look promising with this new deal but there could be near-term hurdles that the company will have to overcome.

Pros

Recently analysts at BTIG initiated coverage on Beyond Meat with a Buy rating and a $173 price target. The report cites Beyond Meat’s strategy of expanding its market share, as well as increasing competition in the space.

BTIG noted that on top of expanding the targeted customer base beyond young and female customers in urban markets, Beyond Meat needs to achieve price parity with traditional protein sources from meat.

While upcoming and current competition is always a threat, BTIG’s rating indicated that the increased competition from larger companies with deeper pockets (Nestle, Kellogg and Tyson) should actually help to increase market awareness and should help to grow the meat-alternative protein category.

Overall, the $173 price target implies 23% upside from the most recent closing price of $140.50.

Cons

Analyst Bryan Spillane of BofA Securities recently reiterated his Underperform rating, which is effectively a Sell rating at other firms. That said, he did raise Beyond Meat’s price objective to $68 from $58.

Ultimately, Spilllane believes that Beyond Meat is playing offense and defense against COVID-19 and that the company is taking a number of actions to combat near-term disruptions. These include:

1. Switching lines and inventory from foodservice to retail
2. Introducing value packs to retail
3. Lowering pricing to encourage trial
4. Investing in e-commerce through Amazon Fresh and own direct to consumer platform
5. Delaying certain marketing programs as expansion plans with customers are put on the back burner.

As part of its investment rationale, BofA Securities noted that the Underperform rating is based on the view that Beyond Meat could see potential sales and distribution gains slow. It cited Beyond Meat’s significant foodservice exposure and premium price relative to other protein options against a potential slowing economic backdrop.