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Bernstein Says Beyond Meat's Stock Has Moved Too High, Too Fast

January 15, 2020 9:35 am
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Bernstein Says Beyond Meat's Stock Has Moved Too High, Too Fast

Bernstein upgraded plant-food maker Beyond Meat Inc (NASDAQ:BYND) back in November, but is moving back to the sidelines due to valuation concerns.

The Analyst

Alexia Howard downgraded Beyond Meat from Outperform to Market Perform with an unchanged $106 price target.

The Thesis

Beyond Meat's stock has already gained 55% since the start of 2020 amid higher expectations for an expansion of the "PLT" burger with McDonald's Corp (NYSE:MCD) in Canada, Howard wrote in a note. The surge has expanded Beyond Meat's stock multiple to 18 times EV/NTM Sales, which is a premium to the research firm's fair multiple range of eight to 10 times.

At current levels, the analyst said Beyond Meat's near-term sales growth potential is "largely priced in" which creates a "less attractive" risk to reward profile. Moving forward, the case for upside in Beyond Meat's stock is contingent on continued international growth.

Howard said Beyond Meat faces a significant growth opportunity across Europe would would more than double its current total addressable market. The company is also looking to make a push into China and take advantage of a protein supply shortage due to the African Swine Fever.

However, the regulatory environment in China could prove to be "difficult to navigate" and management will need to alter its products to better cater to local preferences.

Price Action

Shares of Beyond Meat were trading lower by 2.5% at $114.30.

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