Beyond Meat Rating Cut at Wells Fargo Before Earnings Report

Wells Fargo's analyst covering Beyond Meat cut his rating to underweight, saying a weaker economy may reduce demand for its "premium-priced" product.
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Beyond Meat  (BYND) - Get Report shares dipped Friday after analysts at Wells Fargo downgraded the stock to underweight from equal weight while affirming a $72 price target on the plant-based-meat producer. 

The target indicates 27% potential downside from the stock's Thursday closing price. 

The investment firm sees "much softer food-service demand in 2020."

Wells Fargo identified sharply eroding economic conditions that are likely to lower demand for the company's "premium-priced plant-based meat."

"Beyond Meat may have less flexibility for expense reduction in the middle of the profit-and-loss, given the importance of marketing and R&D for sustaining longer term growth," analyst John Baumgartner said. 

Wells Fargo reduced its earnings estimates, for fiscal 2020 to 6 cents a share from 11 cents and for fiscal 2021 to 35 cents a share from 37 cents. 

The firm also has a tempered view of the meat-alternative producer's launch in China. Beyond Meat this month said it partnered with Starbucks  (SBUX) - Get Report to place products in 3,300 of the company's stores in the country. 

"That said, we maintain that the broader adoption of plant-based meat will prove to be a generational theme  and don’t necessarily assume that higher conventional meat prices or reduced supplies will accelerate plant-based adoption," Baumgartner said. 

Beyond Meat, El Segundo, Calif., on May 5 is scheduled to report first-quarter results. Analysts surveyed by FactSet are expecting the company to report a net loss of 6 cents a share, or an adjusted loss of 8 cents, on revenue of $87.1 million. 

Beyond Meat shares at last check were down 3.9% to $95.18.