Beyond Meat Stock Rises Even After Last Bullish Analyst Says No More - Barron's

Perhaps it is possible to have too much of a good thing, be it delicious faux burgers or triple-digit stock rallies. Wall Street seems to think so.

Bernstein, the last Street firm with a bullish rating on Beyond Meat , downgraded the company on Wednesday, citing its spectacular gains. Yet the stock rebounded after sliding on Tuesday.

The back story. Beyond Meat (ticker: BYND) hasn’t been public for long, but it has certainly made a splash, soaring as high as $186 earlier this month. That success has come on the back of strong earnings, but the results aren’t the only thing working on its favor.

Plenty of consumers are seeking out alternative meat products for their health benefits, as well as animal welfare and environmental reasons. Many investors are hoping that Beyond Meat’s first-mover advantage will help it dominate the industry.

The huge stock spike has led to some concerns that Beyond Meat has come too far too fast, But while skepticism may be warranted, short sellers have been burned. A look at the numbers shows why: Beyond Meat stock is up about 425% from its $25 initial offering price.

What’s new. On Wednesday, Bernstein analyst Alexia Howard cut her rating on Beyond Meat to Market Perform from Outperform, although she raised her target price to $123 from $107. The move comes a day after JPMorgan downgraded Beyond Meat, citing concern about the stock’s valuation.

Beyond Meat fell 25% on Tuesday to $126.04.

Howard’s reasoning is the same. “Valuation considerations [imply] limited upside potential,” she wrote. She was the last analyst with a bullish rating on the stock as other Wall Street firms have retreated in the face of the rally.

Looking ahead. Valuation aside, however, Howard still likes the stock, writing that she expects “significant growth potential in the plant-based meat category” and that Beyond Meat is well positioned as a leader in launching the current wave of plant-based meat products.

The complexity of the alternative meats gives bigger players protection from competition, and plans to lower prices in the future should help expand the market, especially if livestock pandemics push up the prices of traditional meat. She also thinks the company has been thoughtful about its partnerships with restaurants, while rival Impossible Foods has been dealing with supply shortages that could prompt customers to turn to Beyond Meat to fill the gap.

Barron’s has noted Beyond Meat’s appeal, but like Howard, found it hard to justify the stock’s valuation.

Beyond Meat was up 7.7% to $135.75 in on Wednesday morning, while the S&P 500 was down 0.2%.

Write to Teresa Rivas at teresa.rivas@barrons.com

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