On Tuesday, shares of Beyond Meat BYND are plunging, down over 20% in afternoon trading after J.P. Morgan JPM downgraded the stock to “neutral” from “overweight.” J.P. Morgan was the lead underwriter for Beyond Meat, but has kept its price target of $120. “This downgrade was purely a valuation call,” stated J.P. Morgan analyst Ken Goldman. The stock’s fall comes as it announced that it was looking into launching a new meatier version of its plant-based burgers.
Beyond Meat went public in early May, and shares have been on a tear ever since; as of intraday trading on Monday, BYND was up over 600% from its IPO price of $25 a share. However, Beyond Meat and its main rival, Impossible Foods, have both struggled to meet the demand for their meat alternative products. Due to their limited production means, both companies have had trouble keeping up with orders being placed by restaurants who are adding meatless options to their menus. Some of the restaurants that offer their products are TGI Friday’s, Del Taco TACO, Red Robbin RRGB, and Burger King QSR have all added meatless options to their menus in an effort to attract a larger client base.
Beyond Meat was also able to surpass analysts’ expectations in its first earnings report since its IPO. The company predicted that its revenue will more than double in fiscal year 2019 as the demand for their products continues to increase. Beyond Meat’s net sales rose 215% to $40.2 million, exceeding analysts’ predictions of $38.9 million. Grocery store sales accounted for $19.6 million, while sales to restaurants accounted for $20.6 million. The company is anticipating its full year revenue for 2019 to be north of $210 million, transcending Wall Street’s estimate of $205 million. Beyond Meat’s short-sellers reportedly lost more than $400 million betting against the company.
Right now, Beyond Meat sits at a Zacks Rank #3 (Hold), with a Style Score of F in Value. The company currently doesn’t have a P/E since it is a loss-making company, but it does hold a Zacks Style Score of B in Growth, with a projected sales growth of +141.11% for the current fiscal year. With the way the company has been met with an unprecedented demand for their products, the potential they have in sales growth is extraordinary.
If Beyond Meat can enhance production to meet the demand, future sales growth could prove to be tremendous. Additionally, if the company can also successfully implement its new “meatier” product, it can potentially reach new consumers who may be hesitant to switch to plant-based meat. Being able to cater to a new clientele would provide the company with even more room to grow and sustain its success.
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