Double Downgrade Of Beyond Meat Highlights Uncertainty Of The Plant-Based Market

Shares of Beyond Meat BYND dropped 2.5% in premarket trading because the once bullish on faux meat Barclays analyst Benjamin Theurer double downgraded the plant-based meat maker, changing his rating from overweight to underweight, the equivalent of buy to sell.

The move is an unusual one, reports Barrons, because stock exchange analysts usually change their ratings just one notch at a time.

The analyst also raised his price target for the stock from $100 to $115, but expressed caution about what he describes as high valuation levels.

“Prior to the COVID-19 outbreak, Beyond Meat has been increasing its exposure to the foodservice channel, reaching levels closer to 50% of sales,” wrote Theurer to his clients. “The latter, in our view, poses downside risk within the short to medium term as a full foodservice recovery may not happen until 2021.”

The double downgrade exposes significant underlying uncertainty about the longer term of the plant-based protein market, as Theurer points to continued disruptions in food service and a rebounding conventional meat supply chain as critical factors in his analysis of Beyond Meat’s stock price.

While grocery sales of plant based foods have grown exponentially amid the pandemic—sales of fresh meat alternatives up an astounding 239.8% as compared to last year’s sales—the overall sales are still a fraction of what the standard meat industry makes every year.

The meat industry did suffer a awfully public hit amid the pandemic, as meat plant closures because of coronavirus outbreaks among workers caused a bottleneck within the supply chain and compelled pork and poultry farmers to euthanize upwards of a 100,000 hogs and legion chickens.

Amid efforts to examine these plants in a very push towards swift reopening, USDA inspectors also became infected, resulting in a minimum of three deaths. But the meat supply chain seems to possess largely stabilized again, as agricultural economist Jayson Lusk, PhD, explained in a very recent blog post.

Uncertainty about the long run of plant-based proteins has led a minimum of one environmental organization to involve government investment within the sector as the simplest way to scale back the environmental impacts of meat-eating, particularly beef and other ruminant animals that are major gas contributors from the agriculture sector.

Researchers Saloni Shah and Dan Blaustein-Rejto of the Breakthrough Institute recently argued that foodservice closures, nervous investors and slowdowns in research have left the industry “far from secure.” They necessitate around $60 million in government funding and $13.3 million in federal loan guarantees, which they argue could lead on to “60,000 higher-than-average paying jobs, providing $3.6 billion in income annually, in a minimum of 35 different states.”

Meanwhile, the Canadian government recently announced plans to produce $100 million in financing to plant based protein maker Merit Functional Foods. The move was applauded by plant based advocacy group the nice Food Institute, which has argued for a mixture of personal and public investment within the sector.