Beyond Meat Analysts Pessimistic About Pepsi Deal, Stock Pop

Plant-based food maker Beyond Meat Inc BYND deserves credit for striking a partnership with PepsiCo, Inc. PEP but the stock's reaction "overshoots the actual financial opportunity," according to JPMorgan.

Whenever a small company like Beyond Meat strikes any sort of partnership with a global giant like PepsiCo, it's "usually good news," analyst Ken Goldman wrote in a note. But in reality, the financial upside for Beyond Meat is smaller than investors assume.

The collaboration between the two could consist of Beyond Meat supplying PepsiCo with plant-based alternatives to cheese for its Tostitos salsa or creating a new lineup of fully vegan Doritos.

Related Link: Beyond Meat Soars After Announcing Joint Venture With Pepsi

While Beyond Meat should be able to supply PepsiCo with what it needs to create vegan products, the market opportunity for vegan Doritos is likely not large enough to justify the stock's surge above $200 per share.

"So we would fade this news," the analyst wrote. "Maybe today (or even tomorrow) isn't the best time to do it, not with the market still forcing shorts to cover left and right."

Goldman maintains an Underweight rating on Beyond Meat's stock

Similarly, Wells Fargo analysts said that Beyond Meat's upside from working with PepsiCo is minimal. The two companies can find success in working together to lower sodium content but there is "no commercially viable" product the two can launch together.

Cramer Chats With CEO: Beyond Meat CEO Ethan Brown told Jim Cramer why the partnership with PepsiCo is the most important deal in the company's history. The simple reason is that "PepsiCo is everywhere," Cramer said on CNBC.

But Cramer questions if Beyond Meat's stock should have been up by more than 30% Tuesday morning. The stock has attracted short interest as some investors believe Beyond Meat has been losing ground in the growing competitive environment.'

Nevertheless, short investors were not anticipating Tuesday's announcement that was the culmination of years in the making, Cramer said.

BYND Price Action: Share of Beyond Meat hit a new all-time high of $221 Tuesday morning and were trading higher by 20% to $190 at publication time.