Is Beyond Meat overcooked?
The price for a share of Beyond Meat almost tripled on the first day of trading in May and that was just a taste of what was to come.
By the end of the day Monday, the stock had gained an additional 30 percent. But on Tuesday, Wall Street got a case of heartburn after two analysts from J.P. Morgan - a lead underwriter of its initial public offering - sounded the alarm, saying the company's valuation had grown too big too fast. By midday, the stock slumped 22 percent, its biggest one-day sell off to date.
To put that loss into perspective, it means that shares of Beyond Meat are up 430% since the IPO just over a month ago.
It is that pace that brought a downgrade to 'neutral' from J.P. Morgan's Ken Goldman and James Allen.
The price for the stock has surged as high as 650%, costing short sellers about $400 million for their pessimism, according to the research firm S3.
The downgrade from J.P. Morgan comes just days after it upped its price target Friday by $23, to $120.
And J.P. Morgan is far from throwing in the napkin on the El Segundo, California, company.
In a note to clients Tuesday, Goldman and Allen said the downgrade was "purely a valuation call." They referenced a note from last week in which they said revenue and profit potential in Beyond Meat's shares would eventually be priced in, adding, "we think this day has arrived."
J.P. Morgan still says that sales estimates for Beyond Meat are too conservative and believes that it will continue to win over more customers. It's being sold at 30,000 grocery stores, restaurants and schools in the U.S., Canada, Italy, the United Kingdom and Israel.
Still, Beyond Meat has never made an annual profit, losing $30 million last year. It's also facing increasing competition from other "new meat" companies like Impossible Foods. Traditional players like Tyson Foods Inc. are also entering the fray.
There might be room for all of them. U.S. sales of plant-based meats jumped 42% between March 2016 and March 2019 to a total of $888 million, according to Nielsen. Traditional meat sales rose 1% to $85 billion in that same period.
And demand is expected to continue to grow. Consulting firm Euromonitor predicts worldwide sales of meat substitutes will increase 22% by 2023 to a total of $22.9 billion.
The alternative burger wars are escalating too, on the technological front.
On Tuesday, Beyond Meat introduced its newest version, the "new, meatier Beyond Burger," nationwide. The burger, according to the company, "features marbling designed to melt and tenderize like traditional ground beef."