Beyond Meat, PepsiCo Form Plant-Based Snack Venture; Shares Pop 18%

Shares of Beyond Meat spiked 18% after the plant-based meat pioneer formed a joint venture with PepsiCo to develop and sell snack and beverage products made from plant-based protein. PepsiCo rose 1.2% at the close on Jan. 26.

Financial terms of the partnership weren’t disclosed. However, Beyond Meat (BYND) believes that the venture will provide the plant-based meat maker with access to more customers as it enters new product categories and distribution channels.

For the purpose of the joint venture, Beyond Meat and PepsiCo (PEP) will create a new entity called The PLANeT Partnership, LLC (TPP).

“We are thrilled to formally join forces with PepsiCo in The PLANeT Partnership, a joint venture that unites the tremendous depth and breadth of their distribution and marketing capabilities with our leading innovation in plant-based protein,” said Beyond Meat CEO Ethan Brown. “PepsiCo represents the ideal partner for us in this exciting  endeavor, one of global reach and importance.”

The joint venture will make use of what it called positive ingredients through tools and techniques such as regenerative agriculture and net water- and carbon-neutral production plants.

The partnership comes after Beyond Meat earlier this month teamed up with Yum Brands’ (YUM) subsidiary Taco Bell to develop plant-based protein. Over the past year, the company has forged partnerships to enter additional international markets, including Brazil and China, to shift its sales to retail as the coronavirus pandemic is boosting the appetite for healthier eating, while outdoor dining options are limited and consumption in supermarkets is increasing.

As of Sept. 26, Beyond Meat sold products at about 122,000 retail and foodservice outlets in over 80 countries worldwide.

The company’s recent deals have helped BYND’s share price surge 48% over the past month. Following the steep rally, the average analyst price target of $109 now indicates downside potential of about 42% from current levels.

Oppenheimer analyst Rupesh Parikh views the PepsiCo joint venture “very favorably” and believes “this represents another attractive longer-term driver for BYND to capture more share in the expanding plant-based food ecosystem.”

For now, however, Parikh remains sidelined on the stock with a Hold rating as he awaits financial details of the partnership, but suspects “this likely is not impactful to BYND’s results for at least a few quarters.”

“We see a tricky setup from here with challenging fundamentals amidst increasing competition at retail and difficulties at food-service. However, short interest remains quite elevated at 38.1% of float,” the analyst commented.

The rest of the Street has a cautiously bearish outlook on the stock. The Moderate Sell analyst consensus shows 7 Sells, and 9 Holds, versus only 1 Buy. (See BYND stock analysis on TipRanks).

Meanwhile, TipRank’s hedge fund trading activity tool shows that confidence in BYND is currently very positive as 4 hedge funds increased their cumulative holdings in the stock by 30.7K shares in the last quarter.

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