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UBS improved its Beyond Meat stock despite third quarter failure
Beyond meat
McDonald’s Corp. and Beyond Meat Inc. have not confirmed they are working on McDonald’s new plant-based “McPlant” sandwich and analysts at BTIG are wondering why.
“While we have a strong belief that Beyond Meat will eventually be McDonald’s supplier for its McPlant platform, we don’t expect McDonald’s to launch a plant-based burger in the United States in 2021,” wrote analysts led by Peter Saleh.
“Additionally, we find it extremely strange that none of the leadership teams want to confirm a relationship or an intention to work together.”
McDonald’s MCD,
announced at its investor event on Monday that it will start testing the plant-based McPlant sandwich next year.
As well: McDonald’s to launch own plant-based burger, McPlant, after Beyond Meat test
Last year, McDonald’s and Beyond Meat BYND,
conducted a plant-based burger test that ended without further discussion of next steps.
Beyond Meat said in a statement that it “co-created” the McPlant. McDonald’s said suppliers have yet to be announced.
“Our relationship with McDonald’s is good. It is really strong. Our work there on behalf of what they do continues, ”Ethan Brown, CEO of Beyond Meat, said during the company’s earnings call, according to a FactSet transcript.
“And I really want to tell our big strategic customers what they want to share about their supplier base and what they want to share about their launch plans. I don’t want to go ahead and insert ourselves to the point of dominating the headlines on their investor day.
As well: McDonald’s brings McRib back nationwide
Still, Brown said that while he’s not sure how McDonald’s will market McPlant, “we clearly think it would be in everyone’s best interests to use our brand, and I would resist the efforts. not to use it. “
BTIG says McDonald’s hasn’t noticed any changes in the relationship with Beyond Meat, but believes the new McRib and Chicken Sandwich that McDonald’s has planned will delay the launch of McPlant.
BTIG assesses buying Beyond Meat shares with a target price of $ 149, up from $ 173.
“[W]We expect the headwinds from the pandemic to persist in the restaurant business and to a lesser extent in retail for several quarters, ”BTIG said. “We continue to believe in the long-term trajectory of the plant-based meats category, but we expect near-term challenges to weigh on results.”
Shares of Beyond Meat Inc. fell 18.1% on Tuesday after earnings fell below expectations, but UBS raised the stock to sell-neutral, saying the long-term view is still ” intact ”.
UBS lowered its price target to $ 107 from $ 110.
See: Beyond Meat stock drops more than 25% as COVID-19 cuts profits
“Short-term headwinds are now factored into the action,” wrote analysts led by Erika Jackson.
Among those headwinds is the rapidly growing field of competition in the plant-based food category. Beyond Meat has also been hit by consumers’ well-stocked freezers.
“While consumers unloaded their pantries during the quarter, growth in retail was not enough to fully offset food service declines as it was in the second quarter,” said the analysts.
Even though the restaurant industry has struggled, UBS notes that Beyond Meat added 10,000 distribution points in the third quarter and is working with McDonald’s Corp. on the McPlant, which analysts say could add $ 150 million in revenue for Beyond Meat.
“We expect Beyond to exceed end market demand and maintain a leading market share,” UBS said.
Canaccord Genuity analysts expect the headwinds in foodservice to last until 2021.
“COVID-19 has… pushed back retail launches at large quick-service restaurant chains due to lingering uncertainty,” analysts wrote.
Canaccord rates owning Beyond Meat shares with a target price of $ 125, down from $ 140.
Beyond Meat shares have gained 63.1% year-to-date while the S&P 500 SPX index,
is up 9.6% over the period.
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