Beyond Meat's Share Price Fails To Reflect Risk, Analyst Says In Downgrade

Shares of plant-based food maker Beyond Meat Inc BYND have rebounded more than 140% from March lows despite notable risks ahead, according to UBS.

The Beyond Meat Analyst

Steven Strycula downgraded Beyond Meat's stock from Neutral to Sell with a price target lowered from $90 to $73.

The Beyond Meat Thesis

Beyond Meat's sales to the Foodservice category accounts for 51% of total sales and is counted on to act as an "outsized growth engine" over the coming years, Strycula said. However, the firm's intra-quarter checks point to a 25% to 35% year-over-year decline in quick-service restaurant chain sales, a 70% to 85% decline among casual diners, and a 40% to 70% decline at fast-casual restaurants.

Even in a post-coronavirus world, Strycula said consumers are unlike to "snap-back" at restaurants at a fast pace given expectations for an unemployment rate to hit 15% in the second quarter.

Meanwhile, at-home eating habits are likely to persist longer than expected while Beyond Meat's patty is twice the price of a regular beef patty. Chief rival Impossible Foods confirmed over the past few days it will expand to more grocers.

Looking out towards 2025, the plant-based meat alternatives could reach $50 billion in sales while Beyond Meat's sales could grow at a 40% compounded annual growth rate, the analyst wrote in the note. But even at around $110 per share, the stock already priced-in complete economic benefits from notable U.S. partnerships with McDonald's Corp MCD and Starbucks Corporation SBUX that would account for $500 million in sales.

BYND Price Action

Shares of Beyond Meat were trading lower by nearly 7% to $101.30 at the time of publication.