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Beyond Meat’s Valuation Deserves a Haircut, Says Analyst

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Since going public in May 2019, Beyond Meat (BYND) stock has been prone to both rise and sink violently, as the bulls and bears fight it out to take hold of the narrative. Lately, the bulls are once again in the driving seat.

On Tuesday, Beyond Meat announced a partnership with Pepsi. The two apparent opposites will collaborate on a joint venture to develop a line of plant-based snacks and beverages and have called the co-effort the PLANeT Partnership.

The advantages work both ways. Apart from the additional product line, Beyond Meat will make use of Pepsi’s massive distribution network and marketing clout.

For Pepsi, it will enable the beverage colossus to catch a ride on the secular trend for more health-conscious and ethical products, in addition to growing its portfolio of drinks and health-focused snacks.

While the news did little to move PEP shares, BYND stock closed the week at $178.08, up 26%.

“We understand why the BYND shares are higher,” said J.P. Morgan analyst Ken Goldman. “Any time a relatively small company can partner in any way with a global behemoth like PEP, it’s usually good news. And the market seemingly is in the mood to push higher every heavily shorted stock (see GME). But this move overshoots the actual financial opportunity, in our view.”

While the analyst counts the news as “positive” and has no doubt Beyond can “eventually make alt-dairy and alt-pork products to supply PEP with substitutes,” he questions the size of the market for such products. “Is there a huge, uncounted population clamoring for vegan Doritos? Probably not,” Goldman said.

In contrast, had Beyond announced a partnership with McDonald’s, there would have been real cause for excitement, but as Pepsi is merely a beverage and snack maker, the deal probably has “limited upside.”

That said, while Goldman calls Beyond shares “fundamentally over-priced,” he warns against shorting them. Such an act can be dangerous in the current short covering climate and “given the stock’s sensitivity to news flow.”

Eventually, Goldman says, once the announcement will be “properly contextualized,” the time will be right to “fade this news.”

Accordingly, Goldman rates BYND stock an Underweight (i.e. Sell) along with a $94 price target. This figure implies ~47% downside from the current share price. (To watch Goldman’s track record, click here)

Six other analysts currently rate BYND a Sell, and with the addition of 9 Holds and 1 lone Buy, the stock has a Moderate Sell consensus rating. Going by the $109 average price target, shares are expected to be changing hands at a 42% discount a year from now. (See BYND stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.