Companies and Brands

Expect More Analyst Downgrades and Downgrade-Lite Calls on Beyond Meat

Jon C. Ogg

Published: June 11, 2019 10:55 am

Last Updated: January 6, 2020 3:51 am

The so-called dot-com bubble is back, but this time it’s in meatless meat. Beyond Meat Inc. (NASDAQ: BYND) had a stellar initial public offering and has risen exponentially from its $25 per share launch. It even traded north of $185 by Monday.

Now the emerging company, which was valued at about 100 times sales in the trailing 12-months, finally has received its first analyst downgrade. JPMorgan cut Beyond Meat to Neutral from Overweight on Tuesday, but the firm marginally tweaked its price target up to $121 from $120.

While this was a valuation call as the stock reflected its full profit and growth potential, and then some, investors should use the blueprint of the past and either expect more analyst downgrades, or price target adjustments that seem like downgrades, over the valuation.

24/7 Wall St. covered the post-earnings analyst reaction on Beyond Meat, and the company’s own guidance called for net revenues to exceed $210 million with adjusted EBITDA to break even. The company was worth over $9 billion as of Monday’s close.

Many analysts were already at Hold or Neutral after earnings, and that is because of the valuation story being what it is. Those sorts of calls were seen at Merrill Lynch, Jefferies, Credit Suisse and Goldman Sachs, even as they all raised their price targets.

Companies can have mega-growth, but having a valuation of 50 to 100 times sales is not normal. How shares of Beyond Meat rallied to a high of $186 is more like Beyond Logic.

It may be hard for analysts to issue Sell and Underperform ratings in such a high-growth opportunity, but even if they raise price targets and have great praise for the company, the valuation comments by analysts ahead are more likely to feel like downgrades, even if they aren’t formal ones.

It also is widely known that the field of vegan “meat” products is about to get even more competition ahead.

After an hour of trading on Tuesday, Beyond Meat shares were down 19% at $136.00, with over 7 million shares traded.

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