A Major Downgrade Weighs On Beyond Meat
Piper Sandler just issued a major downgrade on Beyond Meat (NASDAQ: BYND) that is weighing heavily on share prices. The analysts say that channel checks reveal Q3 and Q4 revenue will likely come in below the consensus estimate but we’re not so sure. Because of this, they lowered their rating from neutral to underperform, and the price target from $120 to only $95 assuming a 14% downside for the stock. The good news is that we see opportunity in the news.
"Beyond is an early leader in plant-based meat, but we believe its current all-channel retail momentum lags consensus expectations, and our foodservice estimates may be high," warns analyst Michael Lavery.
The data from Marketbeat.com has the analysts' consensus estimate at Hold but it has been getting more bearish over the past month. The consensus price target is $121.50 which is good for a 13% upside but it has been moving lower in recent weeks as well. The consensus price target is down 400 basis points over the last 30 days and we will not be surprised to see it move lower before the next earnings report. Beyond Meat won't report earnings again until early November so there is time for the sentiment to change. The current consensus is for revenue of $134 million which is good for a sequential decline (that we don’t see happening) and a year-over-year and two-year gain above 40%.
There's A Long-Term Opportunity In Beyond Meat
Price action in Beyond Meat has been edging lower in recent weeks and moved lower again in the wake of the downgrade. Price action is down about 5% and will likely move lower in the near term but that is an opportunity for investors. Beyond Meat is a leader in the plant-based meat category and on track for what could be game-changing activity in 2022. The company is working on 2 major partnerships, one with McDonald's and one with PepsiCo, that will not only increase brand awareness but open up new revenue streams and product verticals as well.
Beyond Meat’s partnership with PepsiCo is called the PLANeT Partnership. It is a foray into plant-based meat snacks and is expected to launch its first products in early 2022. You may be thinking, meat snacks, that's not such a big deal but let us tell you the global meat snack industry is worth upwards of $7 billion today and there are no major players in the alternative meat snack business. As for growth, the meat snack industry is expected to double in size to nearly fifteen billion dollars by 2028. This is going to have a significant impact on revenue and earnings.
As for McDonald's, the long-awaited and much-anticipated McPLant Burger is launching in the UK and Ireland this month. Starting with 10 stores, the launch will slowly expand throughout the UK and Ireland and will eventually move to other markets. McDonald's, as you know, is the world's largest fast-food chain and expected to bring in nearly $23 billion in revenue this year. What this means for Beyond Meat is the possibility of 1000 basis points of revenue growth or more.
The Technical Outlook: Beyond Meat Nears Key Support
Shares of Beyond Meat are moving lower and will likely continue to move lower in the near term. That said, price action is fast approaching a key support level at the psychologically important $100 line. We expect to see this level produce a bounce if not a reversal in price action that should coincide with the Q3 earnings release. If however, the $100 level fails to hold, price action in Beyond Meat could fall back to the $80 or $60 level.
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