Beyond Meat’s share price [BYND] took a pounding after CFRA analyst Arun Sundaram downgraded the stock to a hold early last week. At the close of Friday’s trading, Beyond Meat’s share price was trading at $140.32, having slipped 6.8% for the week. Those losses spilt into this week with the stock closing Tuesday’s session at $136.28.
It had been a different story up until the start of July with Beyond Meat’s share price having enjoyed a bit of a run since mid-May. Between 13 May and the end of June, the stock gained 50%, going from $101.52 to $157.49 a share.
Is Sundaram trimming his rating or the stock a signal that Beyond Meat’s share price is overextended or is this a buying opportunity?
Why CFRA cut its rating on Beyond Meat’s share price
CFRA analyst Sundaram trimmed his rating from buy to hold, citing that the maker of plant-based meat alternatives will likely incur higher labor, marketing and shipping costs in the second quarter, while administration costs remain fixed.
In the second quarter, Sundaram expects Beyond Meat to post a $0.33 loss per share, well below the Wall Street consensus is for a $0.23 loss per share.
For the full-year, Sundaram revised his forecast from a $1.15 loss per share to a $1.24 loss per share. Again, this is more bearish than the Wall Street consensus, which puts Beyond Meat’s full-year losses at $0.9 per, before narrowing to a $0.18 loss per share in 2022.
Still, that doesn’t mean Sundaram is an outright bear over Beyond Meat’s future. In fact, the analyst’s revision is more of a valuation update, rather than indicative of any long-term negativity around the company.
"Nevertheless, we remain confident on the long-term growth story, believing that plant-based meat will rapidly grow in the coming years, and that BYND can remain a leader due to well-executed R&D and marketing strategies," the analyst wrote in a note to investors.
“Nevertheless, we remain confident on the long-term growth story, believing that plant-based meat will rapidly grow in the coming years, and that BYND can remain a leader due to well-executed R&D and marketing strategies” - CFRA analyst Arun Sundaram
Writing on Seeking Alpha, Gunner Lane Hardy agreed that Beyond Meat’s growth story isn’t over. Hardy noted that Beyond Meat has a strong short-term cash position and is targeting a market worth around $4.89bn in 2021, which is expected to grow at a 14% CAGR to $9.43bn by 2026. Hardy has a bullish $216 price target on Beyond Meat over the next two to three years.
That said, Beyond Meat’s first-quarter results were certainly mixed as the company continues to recover from the pandemic, while simultaneously trying to grow internationally.
In the first quarter, net revenue came in at $108.2m, up 11.4% on the $97.1m seen in the same period last year. Gross profit, however, fell, coming in at $32.7m, a 13.3% slide from the $37.7m seen in the same period last year. Net income dropped to a $27.3m loss in the quarter, a notable reversal from the $1.8m profit seen in the same quarter 2020. Beyond Meat blamed the loss on costs associated with increased headcount, shipping and international growth.
Beyond Meat's Q1 net revenue - an 11.4% YoY rise
Is Beyond Meat’s growth story over?
In May, a double upgrade from Bernstein spurred a 36% surge in Beyond Meat’s share price. The investment house upped its rating from underperform to outperform, moving its price target from $100 to $130 a share.
Speaking on CNBC’s Closing Bell at the time of the upgrade, reporter Kate Rogers said Bernstein doesn’t consider Beyond Meat to be a “broken growth story”, and expects its foodservice business to rebound as consumer mobility improves. Partnerships with Yum Brands [YUM], which owns KFC  and Pizza Hut, and McDonald's [MCD] should also have a meaningful impact in 2022.
Still, analysts seem divided on Beyond Meat right now.
The stock has three buy ratings and one outperform rating, according to Refininitv data. However, it also has nine hold ratings, six underperform ratings and one sell rating. An average 12-month price target of $121.00, an 11% downside on Tuesday’s close, while the most bullish price target is $190 — a 36.7% upside.
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