Beyond Meat Takes a Tumble

Shares of Beyond Meat [$BYND] took a dive Wednesday after a Piper Sandler analyst downgraded his rating on the stock over skepticism that the plant-based meat maker may not be able to live up to the high expectations. A price cut from rival Impossible Foods also affected the stock.

Analyst Michael Lavery slashed his rating on Beyond Meat [$BYND] to Neutral from Overweight, and his price target to $125 from $144. Make no mistake, he still believes Beyond Meat will bloom from being an early leader in artificial meat—a space conceivably worth as much as $8 billion by 2025— he thinks estimates are just too high, and the company’s Q4 sales are likely to flounder.

Lavery warns shipment data to retailers show that Beyond Meat, which saw lower-than-expected sales in its Q3 earnings report, may be up against a similar problem with its Q4 numbers, a pattern that could linger well into 2021. Ultimately, he suspects that consensus estimates for revenues will have to come back down to earth.

Sales from McDonalds [$MCD] McPlant campaign will be an opportunity for Beyond Meat, even as McDonald’s has rarely spotlit brand partnerships with suppliers in the past. The stock puked on the initial announcement in November because the restaurant behemoth didn’t specify that it would be using Beyond Meat.

Beyond Meat founder and Chief Executive Ethan Brown

Still, Lavery notes that there’s a chance Beyond Meat could get a brand bump from McDonald’s. He writes that the partnership is valuable to Beyond Meat either way, even if its “visibility is not as powerful as the ‘Impossible Whopper’ at Burger King, of course.”

Lavery is keeping a close watch on increasing competition, but he isn’t as worried about it as some bears are. He said that while Beyond Meat and privately held Impossible Foods have gained momentum, more established players, like Kellogg’s [$K] Morningstar Farms, have also been able to grow. That’s because “new entrants can both validate the category with consumers and help build broader visibility. We believe the dynamic can be similar to beverages, where Coke [$KO] and Pepsi [$PEP] both can benefit from the other’s spending on the category.” That’s a theory that other analysts are backing as well.

Beyond Meat’s rival isn’t sitting still in terms of looking to attract more sales either. Impossible Foods today announced its second price cut in a year, as it looks to boost sales. The move—which the company said wouldn’t be its last—prices the Impossible Burger around $6.80 a pound, still higher than the $2 to $3 price of beef burgers, but a 15% cut from its previous level. Mondelez is Going Keto

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