Oppenheimer launched coverage of Beyond Meat stock with a Perform rating, which, apparently, is the firm’s equivalent of Hold. Analyst Rupesh Parikhlikes the brand but can’t get over the stock’s high valuation.
“We overall look quite favorably upon the Beyond Meat brand, product assortment, track record of innovation, longer-term prospects, and positioning to the very on-trend alternative meat category,” writes Parikh. “However, a pricey valuation, increasing competition, and the potential for new selling pressures following the expiration of the lockup suggest more muted upside potential, in our view.”
Investors shouldn’t be surprised by the Perform rating. Only about 25% of analysts covering the company rate shares a Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 55%.
Analysts just can’t get over the stock’s valuation. Beyond Meat (ticker: BYND) trades at 231 times estimated 2020 earnings. There just aren’t a lot of food companies to compare with Beyond Meat’s growth and valuation.
New competition Parikh references is coming from everywhere. Tyson Foods (TSN), Nestlé (NESN.Switzerland), and Kraft Heinz (KHC), among others, are launching or have launched alternative-meat products. To be sure, the category is growing rapidly, making room for multiple new entrants.
Like others, Parikh tries to extrapolate rapid growth and estimate the total market opportunity for alternative meat. He argues that alt-meat can become a $35 billion market. There isn’t a time horizon for his estimate, however, and his market size falls in the middle of other Street estimates, which vary widely based on time horizon and penetration.
Beyond Meat shares are down about 4% in recent trading, at $76.16. But a lukewarm reception from Oppenheimer probably isn’t causing the decline, which is more likely a function of overall market weakness. The S&P 500 is off 1% and the Dow is down almost 400 points after President Donald Trump suggested he would wait to sign a deal with China until after the 2020 election and threatened new tariffs on French imports.
Beyond Meat shares are down more than the market because it’s a volatile stock. In fact, its stock is a story unto itself. Shares are up more than 200% from their $25 initial public offering price and up more than 80% from where the stock opened for trading in May. Shares are down 53% over the past three months and down 67% from their all-time high. It has been one of the wildest rides investors have had to endure in recent memory.
The Beyond IPO lockup expired in mid-November, 180 days after it went public. That’s when insiders and venture-capital funds that grew the company when it was private could sell stock and exit positions. A lockup can lead to stock weakness. Beyond stock, however, is basically flat over the past couple of weeks.
Write to Al Root at allen.root@barrons.com
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Beyond Meat Stock Takes a Hit as Yet Another Analyst Won’t Recommend It - Barron's
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