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The analyst is bearish on key fundamentals, while the growing competitive intensity and pessimism around the US McDonald’s Corporation (NYSE:MCD) partnership have also contributed to Lavery moving to Underweight. He reminds investors that BYND is still burning cash with no clear path to positive EBITDA.
It remains committed to lowering prices below that of animal protein (despite current inflation) by 2024, which likely drives prices down more than it lifts volumes. A nationwide MCD launch the headline impact we had anticipated, as skepticism around its in-market performance likely overshadows the news itself (and an LTO looks more likely than a permanent item), Lavery said in a client note.
The lowered price target reflects lower 2022E and 2023E sales, in addition to the lowered EV/Sales multiple to reflect the company’s growth, profitability, and balance sheet.
The analyst also shared key findings from Pipers survey, which showed that 31% of respondents said they would try plant-based meat if it were cheaper than animal meat.
With Beyond’s historical ~45% repeat rate, this would imply ~15% volume lift. We would also expect a small lift in increased consumption by current users, but that plus the lift from new consumers would still not be enough to offset the large price cuts, resulting in a potentially large net sales decline, the analyst concludes.
Beyond Meat stock price closed at $48.63 on Friday.
By Senad Karaahmetovic
