An analyst slaps Beyond Meat's sales rating, believes that the plant-based meat market is not as important as it is thought

Investors overestimated the potential size of the meat industry, which could become smaller than that of plant-based milk, according to D.A. Davidson.

The company earned a rating of underperformance (equivalent to a sale) on the biggest player in the industry, Beyond Meat. The shares of the meat replacement company are trading around $ 160 per share, while D. A. Davidson has given the stock a target price of $ 130.

"Our cautious approach towards the total addressable market – in particular, the number of likely frequent buyers of meat of plant origin compared to milk since nearly half of the number of non-meat meat consumers versus those who are lactose intolerant – indicates that long-term forecasts are below consensus, "says DA Davidson, Senior Research Analyst, Brian Holland.

Shares of Beyond Meat have climbed nearly 550% since its IPO in April, with investors expecting a multi-billion dollar herbal meat industry. According to Holland, the long-term forecasts of some companies are too high, because the total addressable market for herbal meat in the United States may be smaller than that for milk substitutes.

Holland said he believes that 50% of adult Americans who buy herbal milk also are interested in plant-based meat; however, only half of the group at to find a meat solution, compared to herbal milk drinkers who may have a milk allergy.

In terms of competition, Beyond Meat has a decisive advantage thanks to its fast-growing retail distribution and high visibility. But Holland said that larger players with more resources are likely to enter the space.

The company estimates that in 2028, Beyond Meat could hold 31% of the plant-based meat market.

Shares of Beyond Meat recorded a 3% drop in trading prior to the sale on Friday.

– with report by Michael Bloom of CNBC

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