Wells Fargo Says Beyond Meat Is Overcooked, Downgrades Stock

Beyond Meat BYND could prove to be an unfortunate victim of the coronavirus (COVID-19), which will impact the plant-based food industry moving forward, according to Wells Fargo.

The Beyond Meat Analyst

John Baumgartner downgraded Beyond Meat's stock from Equal-Weight to Underweight with an unchanged $72 price target.

The Beyond Meat Thesis

The COVID-19 pandemic coupled with the "eroding" economic environment poses a greater risk for plant-based food in grocery stores, especially premium-priced brands like Beyond Meat, Baumgartner wrote in the note. The timing of the new headwinds would put Beyond Meat in a difficult position as it likely needs to sustain its marketing and R&D investments to generate longer-term growth.

As such, 2020 will likely be the first "real test" for the plant-based food market and Beyond Meat has minimal flexibility for missteps with the stock trading at an EV of 9.3 times the Street's estimated 2021 sales.

Meanwhile, Beyond Meat's exposure to the Foodservice industry represented 51% of 2019 net sales and faces its own sets of challenges, the analyst said. These include expectations for total 2020 industry sales to fall 12%, pressure on plant-based meat distribution if restaurants transition to smaller menus, and consumers prioritizing value given household budget constraints.

Baumgartner said a broad transition to plant-based food options is a "generational theme" and higher meat prices or lower supplies is unlikely to accelerate adoption.

BYND Price Action

Shares of Beyond Meat were trading lower by 7.7% at $91.39 at time of publication.

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