Is Beyond Meat Beyond Hope?
The McPlant Burger deal with McDonald’s was supposed to be a game-changing event for Beyond Meat (NASDAQ: BYND) but that may not come to pass. At least not in a good way. The test of the McPlant Burger has so far met with tepid success as franchise owners report less than expected sales. This has led to a number of negative analyst commentaries but not all hope is lost. BTIG analyst Peter Saleh says it is too early to judge the success of the deal as both companies are expected to “tweak” the message to encourage a broader acceptance.
"We expect both McDonald's and Beyond Meat to continue to tweak the product and messaging to drive broader acceptance, as our franchise contacts emphasized plant-based efforts would continue. Our conversations definitely temper any expectations for a national launch, though we don't believe such a launch is reflected in shares at the current price."
Analysis Michael Levine of Piper Sandler was not so sanguine, however, and cast doubt on the benefits of a nationwide McPlant rollout even if it happened. In his view, without clear branding that this is a Beyond Meat McPlant Burger there is a risk McDonald’s could take production in-house when the contract expires as well as a lack of customer awareness.
"Given its lack of Beyond branding, there is also the risk MCD takes production in-house at the end of its 3-year contract with Beyond. Either way, the lack of clear branding also mutes the carryover benefit from consumer trial at MCD into retail,"
The Analysts Are Holding Beyond Meat, Institutions Buy
Regardless of the downgrade, the analysts still rate Beyond Meat as a Hold if a weak Hold with a price target of $61.00. This is about 26% above the recent price action but has been trending steadily lower over the past 1 year, 90 days, and 30 days periods. In our view, the Pricetargets.com consensus may continue to fall unless there is a positive improvement in the outlook and that may come from a direction aside from the McPlant Burger. The company is also partnering with Pepsico to get into the multi-billion-dollar meat snack business and their first product, Beyond Jerky, is ready for the shelves.
As iffy as the analyst are, the institutions are buying this stock. The institutional activity in Q1 2022 is not only bullish but overwhelmingly so and with the largest total activity of any quarter to date. In fact, institutional buying is worth all of the rest of the institutional activity to date and it is growing. The institutions now hold more than 65% of the stock and may push it up to over 70% before too long. As for the insiders, they still hold about 9% of the stock and they haven’t sold any for several quarters.
The Technical Outlook: Beyond Meat Falls, Somebody Is Buying
Shares of Beyond Meat slipped in pre-market action following the PIper downgrade but that fall was met by buyers. Activity in the first hour or so of trading is very bullish and suggests that a reversal is in play. Assuming the market follows through on this move, we see price action trending higher into the next reporting season and aided by positive news about the McPlant Burger (we’re anxious to try one) and the Pepsico joint venture (which we are also eager to try). If not, this stock may fall back to recent support but, if it does, we think there are reason’s to be optimistic and they will put a floor in price action.
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