Beyond Meat May Be Just a Fad, Citi Says in New Sell Rating

Beyond Meat Inc. is at risk of being part of a food craze that could potentially sputter and continues to face heightened competition, according to a Citi analyst who initiated coverage with a sell rating.

Close to one-quarter of Americans are eating less meat now than last year, but they aren’t doing so out of moral opposition to eating animals for food, analyst Wendy Nicholson said. In fact, simulated meat products are “too close to the real thing” for some who are philosophically opposed to eating meat, she said.

“Plant-based meat could be a fad,” Nicholson said in a note. And while alt-meat products may be more environmentally friendly, they aren’t much healthier than real meat, she said.

Shares of El Segundo-based Beyond Meat fell as much as 7.4% Friday. They had jumped 87% this year through Thursday’s close. Eight of 20 analysts covering the company have a sell rating on the stock, while just three recommend buying it.

Nicholson said that the company’s Beyond Taco served at Del Taco, and Burger King’s Impossible Burger both “saw trends slow after an initial uptick in sales.”

The company also faces heightened competition with pure-play company Impossible Foods Inc., traditional meat companies like Tyson Foods Inc. and packaged food giants such as Conagra Brands Inc. and Kellogg Co. Yet, while competition is “only getting tougher,” that isn’t entirely a bad thing, Nicholson said.

Product Placement

“The good news, in our view, is that more products coming to market in the plant-based meat category could lead to more consumer awareness of these products and more trial,” she said.

Another plus, Beyond Meat’s product placement in grocery store meat cases has led to higher rates of trial during the pandemic as more people cook at home, Nicholson said. Additionally, more people have been choosing plant-based meat products because of Covid-19 outbreaks in meat processing plants, she said.

Still, the analyst said the company spends a lot on research and development and capital expenditures and expects both to continue. She set a price target of $123 on the shares, which implied a 13% decline from Beyond Meat’s closing price Thursday.

©2020 Bloomberg L.P.

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