Beyond Meat Shares Get Boost From Citigroup Upgrade

Marketing and distribution deals with food giants like Pepsi, McDonald's and YUM! Brands should support Beyond Meat earnings in the years ahead, Citigroup analyst Wendy Nicholson said Tuesday.
Author:
Updated:
Original:

Beyond Meat  (BYND) - Get Report shares traded higher Tuesday following an upgrade from Citigroup that offset the impact of the food group's plans to issue $750 million in convertible debt.

Citi analyst Wendy Nicholson said the issues that hit the group's fourth quarter earnings, including higher costs and weak food services revenues, were "mostly temporary", adding that topline sales growth is likely to get back on track once the COVID pandemic recedes later in the year.

Nicholson lifted her rating on the stock to 'buy' and boosted her price target by $43 to $184 per share, noting a "new-found enthusiasm for the longer-term story at Beyond Meat given their recent new partnerships with PepsiCo  (PEP) - Get Report McDonald's  (MCD) - Get Report and YUM! Brands  (YUM) - Get Report."

"We believe Beyond Meat will continue to grow quickly over the next few years, but we also expect that the path of that growth trajectory may not be linear," Nicholson said. "However, we do believe the company’s new partnerships with McDonald's and YUM signal a longer-term commitment by these players to the plant- based movement and Beyond Meat as a brand. 

"McDonald's and YUM are global, scale players in the foodservice industry and whose partnerships could be a massive driver of growth for BYND in the coming years," she added.

Beyond Meat shares were marked 1.25% higher in early trading Tuesday to change hands at $149.00 each. The gains were capped by the company's plans to sell $750 million in new 6-year debt that can ultimately be converted into common shares of the group.

"I like this call, I think it's a gutsy call and I think when food service fully re-opens, (CEO Ethan Brown) is going to make a lot of money," The Street's founder, Jim Cramer, told CNBC's Squawk on the Street program Tuesday. "I think you buy Beyond Meat here."

Beyond Meat and Pepsi reached a partnership deal to produce and market a new line of snacks in late January when they formed the PLANeT Partnership LLC, a joint venture that will leverage PepsiCo's marketing with Beyond Meat's plant-based food production technology.

Earlier that month, Yum! Brands said its Taco Bell division is exploring a partnership with Beyond Meat for a new plant-based product that will be tested next year. Late last year, Pizza Hut said it partnered with Beyond Meat to offer two plant-based-meat pizzas for a limited time.