Sometimes it is not just technology stocks that command so much attention from the public. It’s no secret that everyone has to eat and drink to stay alive. However, it is just not that common to see a food stock become one of the best initial public offerings. Beyond Meat Inc. (NASDAQ: BYND) is that company leading the path for plant-based meat alternatives. Now its shares are down handily, and many reports point different directions for Beyond Meat’s stock trajectory.
Beyond Meat made history with a massive gain on its IPO debut, rising to $65 after pricing at $25 per share. The stock then managed to surge to more than $200 in mid-2019, and it has been signing up partnerships from retail to restaurants as it looks to gain market share. After a less than wonderful earnings report, there was follow-on news that McDonald’s Corp. (NYSE: MCD) was looking for its own plant-based meat alternative. With McDonald’s a partner, this leaves opportunity and risk.
The stock market focused on the risk aspect of the McDonald’s news. Beyond Meat was a $190 stock just a month ago, but in recent days the share price went as low as about $115, before recovering to $125 or more. It would be nearly impossible to classify Beyond Meat as a “value stock” at close to 200 times expected 2021 earnings and with a $7.9 billion market, implying a valuation of about 12 times expected 2021 revenues.
While losing McDonald’s as a partner would be a serious blow from the McPlant offering, McDonald’s almost certainly will be keeping whatever it makes 100% in-house. On last look, grocery shoppers do not purchase any McDonald’s food at grocery stores, and McDonald’s is not known as an outsourcing destination for other restaurant chains’ food items. Whether the McDonald’s drive-thru will be a top destination for plant-based meat alternatives a year from now remains to be seen.
There is one other notion here, and the share price falling from more than $150 in just a few days finally may have made Beyond Meat shares more attractive to would-be investors. This matters because it is new investors that will be required to drive the shares higher, if the existing shareholders are not going to buy more shares.
24/7 Wall St. has tracked more than 10 analyst reports on Beyond Meat in the past 24 hours. Most firms have lowered their price targets, but that is not universal. Two analyst upgrades were even seen. This report montage will not sound like there is a “screaming buy” or “pounding the table” scenario. Still, how many investors have sworn they would buy this stock if it ever “gets cheap enough” in price?
UBS raised Beyond Meat to Neutral from Sell, but the firm did trim its target price to $107 from $110.
Piper Sandler also raised its rating to Overweight from Neutral, while cutting its price target to $144 from $178.
BofA Securities reiterated its Underperform rating and maintained its $81 price objective. The firm expects Beyond Meat to continue to invest behind long-term growth opportunities across multiple channels and geographies, but the timing of more foodservice partnerships and launches remain uncertain, given the impact of COVID-19.
CFRA has a Sell rating and cut its target to $80 from $100. The independent research firm even pointed out that this was one of those quarters that Beyond Meat will want to forget about. The firm had anticipated that retail demand has moderated before the foodservice demand could recover. CFRA pointed out that smaller restaurants equate roughly two-thirds of foodservice sales.
Bernstein had an Underweight rating and it slashed its target price to $89 from $136.
Wells Fargo has an Underweight rating but it raised its target price to $77 from $72.
Goldman Sachs reiterated its Sell rating with a $105 price target.
Credit Suisse maintained its Neutral rating and cut its target to $120 from $142.
BTIG maintained its Buy rating but lowered its target price to $149 from $173.
Canaccord Genuity lowered its rating to Hold and lowered its price target to $125 from $140.
JPMorgan has an Underweight rating, and it lowered its price target from $122 to $104.
Jefferies had a Hold rating and took its target down to $117 from $118.
Remember that no single analyst call should ever be used as a sole basis to buy or sell a stock. However, it is always interesting to see what happens when about a dozen reports are issued at about the same time.
None of these ratings or price targets seem to be giving new investors any strong reason to run out and immediately buy Beyond Meat’s stock. A contrarian might point out that Beyond Meat is definitely an interesting growth story that many investors have been waiting to buy, if and when the stock’s valuation finally comes down to earth.
Another aspect to consider here is that not many food companies are expected to average 50% sales growth in both 2020 and in 2021, but that is what the pack of analysts is assuming.
The analyst community also was unable to justify higher price targets when this stock was screaming higher and higher. Now, with a Refinitiv consensus analyst price target of $129.21 going into earnings (and about $117 on last look), they finally have come closer to the actual share price.
Again, these calls do not exactly resemble a “screaming buy.” Yet, what if its stock were to pull back handily again?
Beyond Meat shares traded just under $115 briefly on Tuesday, but the stock was last seen at $126.38 on Wednesday. Its 52-week trading range is $48.18 to $197.50.