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Beyond Meat Posts Wider Loss but Analysts Look to Deals With Yum and McDonald's

Analysts are guardedly optimistic about Beyond Meat after it missed fourth-quarter expectations, but announced development deals with McDonald's and Yum.
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Analysts were guardedly optimistic about Beyond Meat  (BYND)  after the plant-based food maker missed Wall Street's fourth-quarter expectations, but announced development deals with McDonald's  (MCD)  and Yum Brands  (YUM) .

Shares of the El Segundo, Calif. company were climbing 7% to $153.81 in premarket trading Friday.

After reporting a wider-than-expected fourth-quarter loss, Beyond Meat said it had reached a multi-year deal with McDonald's to be the preferred supplier for the McPlant, a plant-based burger currently being tested in some McDonald's markets. 

The company also reached a strategic deal with Yum Brands, the parent of Kentucky Fried Chicken, Pizza Hut and Taco Bell.

In a note titled "A Weak 4Q, but Big Plans for the Future," Credit Suisse analyst Robert Moskow, who rates the company neutral with a $120 price target, said Beyond Meat described conditions in the foodservice channel as too uncertain to provide guidance in 2021 "but softened the blow" by announcing the two deals.

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"These partnerships are not expected to lead to material sales in 2021, but CEO Ethan Brown described them as 'enormous' in size over time," Moskow said. "We welcome the additional clarity, but we believe we have already adequately included it in our estimate for $2 billion in sales by 2026, up from $407 million in 2020."

Piper Sandler analyst Michael Lavery, who rates the stock neutral with a $125 price target, said Beyond Meat "has already done test launches with McDonald's and KFC in markets across the globe, and it expects modest 2021 impact from the more formal partnerships it announced (Thursday)."

Citi analyst Wendy Nicholson, who rates the company neutral with a $141 price target, said Beyond Meat’s new partnerships with McDonald’s and Yum! Brands probably won’t “move the needle” for the company’s 2021 results.

"Given a still lofty valuation and a weakening fundamental backdrop, we believe investors should remain on the sidelines," said Oppenheimer analyst Rupesh Parikh, who rates the stock perform. "We continue to be optimistic that a post COVID-19 environment coupled with recent partnerships could lead to improved fundamentals down the road."

In the near term, Parikh said, "we expect coronavirus to weigh upon BYND's restaurant and foodservice results."