- Beyond Meat shares have surged more than 600% since the pricing of the company’s initial public offering on May 1.
- On Tuesday, JPMorgan downgraded the stock from to "neutral," citing its valuation.
- Shares fell more than 11% on the news.
- Watch Beyond Meat trade live.
Beyond Meat may be beyond its own valuation.
The plant-based burger maker — which has been the best performing US initial public offering of the year — sank more than 11% early Tuesday after analysts at JPMorgan downgraded the stock to "neutral" from "overweight."
The downgrade is "purely a valuation call," wrote Ken Goldman and James Allen in a note out Tuesday titled, "Beyond Our Price Target." Last week, the team raised its price target to $120 from $97 after Beyond Meat’s blockbuster earnings release.
But after shares surged 21% on Monday to more than $168 apiece, the analysts say the company’s extraordinary revenue and profit potential has been more than priced into the stock as shares have gained more than 600% gain since their May 1 pricing. They raised their price target by $1 to $121 a share.
At this price target, the risk and reward is now balanced, the analysts wrote. While they maintained their highly favorable position on the plant-based meat alternative market and Beyond’s role within it, the analysts say not all news going forward will be positive and that "competitors are getting more aggressive."
Beyond Meat has become one of the most expensive stocks to bet against, with borrow fees growing to over 100%. When the lock-up period ends in October, more shares will be available to trade or borrow, which could weigh on their price.
Still, the analysts said a rating below "neutral" would be too low.
"We do not think an Underweight rating is appropriate at this time," the analysts wrote, noting their current price target takes into account downside risk and Beyond’s long-term growth story. They also said shorting the stock is risky, "given that 2019 financials are likely to exceed Street expectations."
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