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Plant-based food maker Beyond Meat Inc (NASDAQ: BYND) is overexposed to the food service sector and current coronavirus-related headwinds warrant a shift to a bearish stance, according to BofA Securities.
The Beyond Meat Analyst
Bryan Spillane downgraded Beyond Meat's stock from Neutral to Underperform with a price target lowered from $126 to $50.
The Beyond Meat Thesis
Spillane said Beyond Meat's exposure to the foodservice sector represented 51% of 2019 sales versus an average of 20% across other food and beverage stocks BofA Securities covers. The expanding coronavirus outbreak is likely to be a major headwind for the entire segment, which implies "significant" problems for Beyond Meat.
If U.S. and European economies dip into a recession and unemployment rises, these concerns could hinder Beyond Meat's business at a time when it should be increasing consumer adoption, the analyst wrote in a note. Instead, consumers are more likely to look towards less expensive food items and eat out less.
Granted, many consumers especially vegans are unlikely to give up their eating habits during economic uncertainties, Spillane said they're likely to trade down to private label plant-based items.
BYND Price Action
Shares of Beyond Meat were trading higher by 2% Thursday at $55.09.
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