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May 6, 2020

Beyond Meat rises as analysts lift targets due to retail boost

Ross Healy discusses Beyond Meat

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The squeeze on sales suffered by Beyond Meat Inc. due to restaurant closures in the first quarter wasn’t as bad as feared, while stockpiling by consumers benefited the group’s retail business, analysts said.

UBS Group AG’s Steven Strycula noted the faux-meat maker’s U.S. retail sales surged 157 per cent year-on-year, and joined analysts at Jefferies and Piper Sandler & Co. in lifting his price target for the stock.

Beyond Meat’s shares jumped 12 per cent in pre-market trading to US$112.30 a share, adding to a 32 per cent year-to-date rise.

Here’s a summary of what analysts had to say:

Jefferies, Rob Dickerson

Rating hold, raises price target to US$95 from US$83

A 37 per cent rise in retail sales was offset by a 29 per cent sequential decline in foodservice division amid lockdowns. As a result revenue declined about one per cent quarter-on-quarter.

Lowering prices via larger frozen product offerings combined with heavier promotions during grilling season should help take incremental share from the beef industry.

Piper Sandler, Michael Lavery

Rating neutral, raises price target to US$95 from US$72

Food services trends look better than expected, with quick-service restaurant sales down only modestly.

Raises 2020 revenue estimate 26 per cent, 2021 by 29 per cent on more modest foodservice declines, distribution gains in China, and steady retail sales growth.

UBS, Steven Strycula

Rating sell, price target raised to US$75 from US$73

Retail business was a bright spot with quarterly sales up 157 per cent year-on-year.

However, notes restaurants are placing increased menu emphasis on value items and are hesitant to onboard new menu items.

First-quarter gross margin of 38.8 per cent versus estimate of 31 per cent reflects greater leverage than Street anticipated.

Berenberg, Donald McLee

Rating buy, price target US$115

The sales beat was primarily driven by increased volumes in the retail channel due to stockpiling.

Also benefited from new products and international growth amid deals such as a Starbucks partnership in Canada and China.Overall, restaurant difficulties to outweigh the success in retail. Restaurants accounted for about 50 per cent of 2019 revenue.

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