Beyond Meat Reveals New Summer Strategy, But Analysts See 30% Downside Risk Ahead

Beyond Meat (BYND) CEO Ethan Brown has revealed how the plant-based ‘meat’ company plans to take advantage of the coronavirus-related beef supply shortage and the corresponding rise in meat prices.

“We view this as a massive opportunity for us to drive trial and win consumers over into our segment,” he told CNBC’s Mad Money.

“When you look at beef, which is now at $4.10 a pound on the wholesale markets and you transfer that to retail, we have a fighting chance now as we offer value packs,” said Brown. He continued: “we’re developing those right now for the summer season.”

“We’re going to look at the summer as a real opportunity for us to be relevant to the consumer as they’re looking for solutions as the meat supply has been disrupted,” Brown said. “So we’re going to take aggressive pricing over the summer to be able to make our product be much more closer to the animal-protein equivalent.”

Beyond Meat stock is currently trading up an eyewatering 67% year-to-date, boosted by a strong first quarter earnings beat. However the recent rally has left many analysts warning that a pullback is now on the cards.

“Although BYND topped Q1 EBITDA consensus expectations nicely, 2020 guidance was pulled, driven by the uncertainty around the magnitude and duration of the COVID-driven impact to the foodservice channel” commented Jefferies analyst Rob Dickerson.

Looking out past Q1 earnings the analyst writes: “Even though alternative meat supply chains supposedly are sound relative to their animal protein counterparts and growth has ramped… we remain cautious on BYND given the increasing competition, reduced in-store traffic, and price/unit risk vis-à-vis heightened unemployment dynamic.”

Dickerson has a hold rating on the stock and $83 price target- indicating significant downside potential from the current $126 share price.

Oppenheimer’s Rupesh Parikh strikes a more optimistic tone but nonetheless remains on the sidelines. Like Dickerson he has a hold rating on the stock, telling investors: “Given the Q1 positives, the more difficult foodservice conditions post Q1 coupled with a now elevated valuation keep us sidelined.”

“Two of our favorite growth stories in our universe including BYND and Freshpet (FRPT) are both benefiting from significant scarcity value within the consumer staples universe, but valuations are difficult to justify for both names at current levels, in our view” Parikh explains.

Overall Beyond Meat shows a Hold analyst consensus with only 3 recent buy ratings, vs 7 hold ratings and 4 sell ratings. Meanwhile the $87 average analyst price target indicates downside potential of over 30%. (See BYND stock analysis on TipRanks)

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