Beyond the meat stock gets another sales rating

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Beyond the meat

Wall Street analysts do not like stocks. Only one, Ken Goldman of JPMorgan, evaluates stock at purchase, according to FactSet, the industry's data provider. And the average stock price is $ 156, just below the last trading levels.

Friday, another broker said to sell.

D.A. Davidson analyst Brian Holland Initiated hedging of Beyond Meat stocks (symbol: BYND) with an underweight index, the Davidson equivalent of Sell. It targets $ 130 for the share price, down nearly 20% from Thursday's closing level.

The story back. Beyond Meat's stock is up more than 540% from its IPO price of $ 25 and more than 280% from its original 42 deals. (Do not forget that most investors do not buy at the price of the IPO and have to pay prevailing prices on the secondary stock market when they buy stock.)

Stocks are trading at around 23 times estimated sales for 2020, far more than companies in the sector
S & P 500.
Of course, Beyond Meat is growing faster than other food companies. Wall Street estimates that the company will generate sales of about $ 416 million next year, up nearly 60% from the estimated sales of 2019.

What's up. Beyond the meat actions seem expensive. This is one of the reasons why Street does not recommend buying them, but Holland's call for stock is not just a question of valuation.

"We believe that Beyond Meat has achieved a significant advance in legitimizing a nascent segment (herbal meat) in a $ 1.4 trillion (total meat) category," Holland wrote in a research report on Friday. "Our thesis does not reflect a negative view of the company, the quality of its portfolio or its ability to execute. Instead, our cautious approach to the total addressable market – in particular, fewer likely frequent buyers of meat of plant origin compared to milk, about half the number of meat absorbers compared to lactose intolerant – informs long-term forecasts. "

Analysts often start with the size of the alternative milk market to assess the importance of the meat meat market. Holland believes that substitute meats may not enter the animal protein market in the same way that nut and soy products have absorbed a larger share of traditional dairy product sales.

Herbal milk accounts for about 13% of the market, according to Holland. He believes that plant-based meat will reach about 10% of the price in all categories of meat, such as hamburgers, chicken, sausages and bacon.

Advocates of alternative meat could counter the environmental benefits of vegetable proteins that go beyond health reasons, such as lactose intolerance, that drive consumers to buy vegetable milk. According to the United Nations, for example, more than 14% of total greenhouse gas emissions come from livestock. Some consumers may buy substitute meat to better control climate change.

Look forward. The general opinion of Wall Street illustrates the dichotomy between feelings about business models and stock prices. All good companies are not good deeds. In general, Wall Street is worried that investors are paying too much for the new alternative meat business, even though most analysts agree that the Beyond Meat management team is successfully completing its business plan.

Barron is also cautious about the shares of Beyond Meat. Like the street, we are not cautious because of the business model. Instead, we doubt to buy stocks with this valuation and believe that the share price represents the biggest risk for investors who buy stock today.

Write to Al Root at [email protected]