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Double Downgrade Of Beyond Meat Highlights Uncertainty Of The Plant-Based Market

Shares of Beyond Meat
dropped 2.5% in premarket trading as the once bullish on faux meat Barclays analyst Benjamin Theurer double downgraded the plant-based meat maker, changing his rating from overweight to underweight, the equivalent of buy to sell.

The move is an unusual one, reports Barrons, because stock market analysts usually change their ratings only one notch at a time. 

The analyst also raised his price target for the stock from $100 to $115, but expressed caution about what he describes as high valuation levels.

“Prior to the COVID-19 outbreak, Beyond Meat has been increasing its exposure to the foodservice channel, reaching levels closer to 50% of sales,” wrote Theurer to his clients. “The latter, in our view, poses downside risk in the short to medium term as a full foodservice recovery might not take place until 2021.”

The double downgrade exposes significant underlying uncertainty about the future of the plant-based protein market, as Theurer points to continued disruptions in food service and a rebounding conventional meat supply chain as critical factors in his analysis of Beyond Meat’s stock price. 

While grocery sales of plant based foods have grown exponentially amid the pandemic—sales of fresh meat alternatives up an astounding 239.8% as compared to last year’s sales—the overall sales are still a fraction of what the conventional meat industry makes each year.

The meat industry did suffer a very public hit amid the pandemic, as meat plant closures due to coronavirus outbreaks among workers caused a bottleneck in the supply chain and forced pork and poultry farmers to euthanize upwards of a 100,000 hogs and millions of chickens.

Amid efforts to inspect these plants in a push towards swift reopening, USDA inspectors also became infected, leading to at least three deaths. But the meat supply chain seems to have largely stabilized again, as agricultural economist Jayson Lusk, PhD, explained in a recent blog post. 

Uncertainty about the future of plant-based proteins has led at least one environmental organization to call for government investment in the sector as a way to reduce the environmental impacts of meat-eating, particularly beef and other ruminant animals that are major greenhouse gas contributors from the agriculture sector.

Researchers Saloni Shah and Dan Blaustein-Rejto of the Breakthrough Institute recently argued that foodservice closures, nervous investors and slowdowns in research have left the industry “far from secure.” They call for around $60 million in government funding and $13.3 million in federal loan guarantees, which they argue could lead to “60,000 higher-than-average paying jobs, providing $3.6 billion in income each year, in at least 35 different states.”

Meanwhile, the Canadian government recently announced plans to provide $100 million in financing to plant based protein maker Merit Functional Foods. The move was applauded by plant based advocacy group The Good Food Institute, which has argued for a combination of private and public investment in the sector.  

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