Shares of Beyond Meat (BYND) are trading higher despite an uninspiring reception from sell-side analysts after the quiet period expired from IPO underwriters today.
Today's strength may be related to the company's announcement of an expanded partnership with Zandbergen World's Finest Meat to produce its plant-based meats locally in Europe at a new manufacturing facility being constructed by Zandbergen in the Netherlands.
However, strength is likely most tied to continued momentum in the stock that has been unrelenting since the IPO on May 2.
Coming back to the analyst calls from this morning, JPMorgan initiated coverage of the stock with an Overweight rating while Bank of America Merrill Lynch, Jefferies, Goldman Sachs, Credit Suisse and William Blair are on the sidelines with neutral/equivalent ratings as of this morning. Bernstein previously recommended the stock, initiating coverage with an Outperform rating on May 6, while Consumer Edge Research started coverage with an Equal Weight rating on May 20. All in, we count eight firms covering the stock with two at Buy and six at Neutral/hold.
Less than stellar recommendations do not come as a surprise given the aggressive valuation for the hottest IPO of the year. The stock is up well over 200% since pricing 9.6 mln shares at $25 one month ago. The stock has essentially doubled since opening at $46 on its first day of trading as momentum traders have piled in.
The producer of novel plant-based meats has a $5 bln market capitalization, which equates to more than 24x sales estimates for this year. A revenue multiple that high makes it tough for analysts to justify buying the stock at these levels.
Beyond Meat is expected to grow revenue 133% to $205 mln this year after growing revenue 170% to $88 mln last year. The market loves the company's high sales growth in a burgeoning planted-based food segment supported by the secular trend toward more sustainable foods.
It is worth noting that a tight float (limited supply) can contribute to initial strength and short squeezes in hot IPOs. According to Capital IQ, roughly 10% of the 34 mln share float is sold short. The lockup expiration will come on October 29.
Beyond Meats' primarily rival is Impossible Foods, which reportedly raised $300 mln at a $2 bln valuation two weeks ago.
Beyond Meat will report its fiscal first quarter and its first report as a publicly traded company on the afternoon of Thursday, June 6. The company preannounced first quarter results in an adjusted S-1 filing before the IPO. The company guided for a first quarter operating loss of $6.7-7.7 mln with revenue up 197-213% to $38-40 mln. The buzz from the IPO may actually provide a boost to sales near term as consumers who have heard about the stock try the product.
For now, the trend in BYND stock is clearly to the upside. The stock found support at its newly formed 10-day moving average near $80/share last week.