Beyond Meat’s shares plunge as analysts ask if firm is priced beyond its value
Beyond Meat Inc.’s share price fell sharply Tuesday, the El Segundo fake-meat company’s worst day since its initial public offering, after previously bullish analysts threw in the towel.
That paused a rally that has rocketed the stock more than 500% higher.
JPMorgan Chase & Co.’s Ken Goldman and James Allen cut their recommendation on the stock to neutral from overweight, saying it’s now too expensive, with a $10-billion value that’s 27 times the company’s estimated 2020 sales. The two-day frenzy that lifted the stock 69% from Thursday’s close through Monday was too much, the analysts said.
In response, Beyond Meat’s shares tumbled 25% to $126.04 Tuesday.
J.P. Morgan had just upped its price target Friday by $23, to $120, but even that could not keep pace with the soaring share price. The shares had been priced at $25 for the IPO in early May.
In a note to clients Tuesday, Goldman and Allen said the downgrade was “purely a valuation call.” They referenced a note from last week in which they said revenue and profit potential in Beyond Meat’s shares would eventually be priced in, adding, “We think this day has arrived.”
J.P. Morgan still says that sales estimates for Beyond Meat are too conservative and believes it will continue to win over more customers. It’s being sold at 30,000 grocery stores, restaurants and schools in the U.S., Canada, Italy, the United Kingdom and Israel.
Still, Beyond Meat has never made an annual profit, losing $30 million last year. It’s also facing increasing competition from other “new meat” companies such as Impossible Foods. Traditional players including Tyson Foods Inc. are also entering the fray.
There might be room for all of them. Annual U.S. sales of plant-based meats jumped 42% from March 2016 to March 2019 to $888 million, according to Nielsen. Annual sales of traditional meat rose 1% in that same period to $85 billion.
And demand is expected to continue to grow. Consulting firm Euromonitor predicts worldwide sales of meat substitutes will increase 22% by 2023 to a total of $22.9 billion.
The alternative burger wars are escalating too, on the technological front.
On Tuesday, Beyond Meat introduced its newest version, the “new, meatier Beyond Burger,” nationwide. The burger, according to the company, “features marbling designed to melt and tenderize like traditional ground beef.”
Bloomberg contributed to this report.
