Shares of Beyond Meat were down in recent trading.
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Shares of Beyond Meat were falling Wednesday after a Piper Sandler analyst downgraded his rating on the stock over worries that the plant-based meat maker may not be able to match high expectations. A price cut from rival Impossible Foods also weighed on shares.
Analyst Michael Lavery cut his rating on Beyond Meat (ticker: BYND) to Neutral from Overweight, and his price target to $125 from $144. While he still thinks Beyond Meat will benefit from being an early leader in faux meat—a category potentially worth as much as $8 billion by 2025— he believes consensus estimates are currently too high, and the company’s fourth-quarter sales could once again disappoint.
Lavery warns shipment data to retailers show that Beyond Meat, which saw lower-than-expected sales in its third-quarter earnings report, may face a similar problem with its fourth-quarter numbers, a pattern that could persist this year. He believes that consensus estimates for revenues will have to come down.
Nonetheless, he’s less concerned about other aspects of the company’s business.
Sales from McDonald’s (MCD) McPlant initiative will be an opportunity for Beyond Meat, even as historically McDonald’s has rarely highlighted brand partnerships with suppliers. The stock dropped on the initial announcement in November because the restaurant giant didn’t specify that it would be using Beyond Meat. Still, Lavery writes that there’s a chance Beyond Meat could get a brand bump from McDonald’s. He writes that the partnership is valuable to Beyond Meat either way, even if its “visibility is not as powerful as the ‘Impossible Whopper’ at Burger King, of course.”
Lavery has one eye on increasing competition, although he isn’t as worried about it as some bears are. He notes that while Beyond Meat and privately held Impossible Foods have gained ground, more established players, like Kellogg’s (K) Morningstar Farms, have also been able to grow. That’s because “new entrants can both validate the category with consumers and help build broader visibility. We believe the dynamic can be similar to beverages, where Coke (KO) and Pepsi (PEP) both can benefit from the other’s spending on the category.” That’s a theory that other analysts support as well.
Beyond Meat’s competition isn’t sitting still in terms of looking to attract more sales either. Impossible Foods today announced its second price cut in a year, as it looks to juice sales. The move—which the company said wouldn’t be its last—prices the Impossible Burger around $6.80 a pound, still higher than the $2 to $3 price of beef burgers, but a 15% cut from its prior level.
Beyond Meat is down 2.4% to $123 in recent trading.
Write to Teresa Rivas at [email protected]
