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Beyond meat plunge spurs two upgrades amid McPlant benefit

Joe Easton and Janet Freund
Bloomberg

Beyond Meat Inc. shares plunged in premarket trading after the veggie-burger maker reported disappointing revenue. At least two analysts upgraded their recommendations, saying the stock slump makes it a more attractive investment.

The shares fell 21% to $118 at 7:52 a.m. in New York after Beyond Meat said COVID-19 lockdowns hurt restaurant sales and pandemic-fueled stockpiling by consumers had slowed.

A meatless burger parry called Beyond Burger is on display at a grocery store in Richmond, Va. in this June 27, 2019, file photo.

The decline makes the stock attractive, given that McDonald’s Corp. is working with the company as it rolls out plant-based patties, said Piper Sandler analyst Michael S. Lavery, who lifted his rating to overweight from neutral while lowering his price target to $144 from $178.

“We see opportunity as a long-awaited McDonald’s launch is set to start, and encouraging vaccine news may help food service broadly,” Lavery wrote in a note to clients. A survey conducted by the broker also suggests plant-based foods appeal to younger consumers, which could drive growth over time as customers age, the analyst said.

UBS Erika Jackson upgraded the stock to neutral from sell, citing the third-quarter earnings-related selloff. Jackson wasn’t surprised to see the postmarket drop as the company saw “outsized foodservice headwinds” and “elevated price/mix headwinds.” But following the plunge, she says her “lower estimates, COVID-19 challenges, and price/mix headwinds” are reflected in the stock price.

Further, Jackson estimates that the El Segundo, California-based company’s collaboration with McDonald’s could add around $150 million of annual revenue for Beyond. She is also positive on the 10,000 new new points of distribution the company added during the third quarter.

However, risks remain over the next 12 months, she said. They include continued promotional and pack-size headwinds, increased marketing spending as it “aims to reach new households” amid more intense competition and a recessionary environment that may lead to a consumer trade-down. Jackson trimmed her price target to $107 from $110.

All of Wall Street was not as optimistic about the collaboration with McDonald’s. Adam Samuelson, an analyst at Goldman Sachs who rates Beyond Meat sell, wrote that “increased uncertainty on the nature and scope of this relationship will be a headwind to shares, and more broadly reinforces our concern that COVID is delaying incremental menu innovation at food-service operators that can slow trial and household penetration,” tempering the near-to-medium term growth trajectory for Beyond Meat.

Jefferies Rob Dickerson told clients in a note the third-quarter “dent” will likely “lower conviction on 2021 growth trajectory potential” given that the “timing and magnitude of both revenue and margin recovery” were not spelled out by management. Dickerson rates the stock hold (price target $117 from $118).

Beyond Meat’s stock closed at $150.50 a share on Monday, up about 500% since a May 2019 initial public offering at $25.