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Beyond Meat Won’t Gain From High Beef Prices. The ‘Worst Is Yet to Come.’

Barclays analyst Benjamin Theurer downgraded shares of Beyond Meat to Underweight from Equal Weight

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Beyond Meat
isn’t a cheap alternative to beef, and in an environment where consumers are looking to save wherever they can, the maker of plant-based meat alternatives is in a tough spot.

Barclays analyst Benjamin Theurer downgraded shares of
Beyond Meat
to Underweight from Equal Weight on Monday. He cut his 12-month price target on the stock to $10 from $13, saying that although the stock has fallen 81% in 2022, “the worst is yet to come.”

Shares of Beyond Meat were down 2.8% Monday to $12.36.

The problem, Theurer wrote in a research note, is that although the price of meat is rising, shoppers may not switch to Beyond Meat and comparable products.

“Despite our call for much higher beef prices by 2025, alternative meat companies may not necessarily benefit,” he wrote. “Beyond Meat’s third quarter 2022 average price of $8.35 per pound is already 72% higher than USDA’s
September 2022 ground beef at $4.85 per pound, and it also takes time for consumer habits to change.”

Beyond Meat Chief Executive Ethan Walden Brown acknowledged the issue in the company’s most recent earnings conference call.

“With persistent and 40-year record inflation in grocery stores, shoppers are seeking to dial out inflation by, among other measures, switching out higher cost proteins for lower cost proteins,” Brown said. “…And while these items are in either end of the continuum, consumers are trading down throughout generally from higher cost beef and pork items to lower cost chicken. In this environment, the category in Beyond Meat should be expected to see declines as consumers flock to cheaper proteins.”

Beyond Meat isn’t the only expensive protein option on the market. All food prices have been on the rise this year. According to the latest consumer price index report, food prices increased 0.6% in October following a 0.8% increase in September. And according to the U.S. Department of Agriculture, ground beef was priced at $4.84 a pound in October, which is around 20% more than it cost this time last year.

Theurer expects ground beef prices to rise to around $6.50 a pound by 2025. .

“Although we believe in the long-term potential of alternative meats, the current market environment, combined with lingering questions around Beyond Meat’s results and cash flow guidance, warrant a downgrade in rating,” Theurer wrote.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Credit: marketwatch.com

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