Stock Analysis & Ideas

Beyond Meat Is a Great Company, but the Stock Is Not, Says Analyst

Hot on the heels of trials for its plant-based burger with McDonald’s, Beyond Meat (BYND) is looking to grab another opportunity with a fast-food giant.

On Monday, the company announced that KFC will be giving Beyond’s plant-based fried chicken product – naturally called Beyond Fried Chicken – a limited run at U.S. KFC locations.

The rollout will begin on January 10th, which BTIG analyst Peter Saleh expects will last the “traditional” 6-8 weeks.

Due to the test’s limited run, Saleh expects the impact on revenue to be “rather modest,” coming in between $15 million to $40 million. This is based on the assumption the Beyond Chicken product runs for the full 8 weeks and generates between 2%-5% of sales. Saleh estimates the limited time offer could provide a 4%-9% boost to Beyond revenue in 1Q22.

However, of more importance is the long-term impact should the launch prove a success, with the possibility the offering is given a permanent slot on the KFC menu.

“While the impact to sales and profit is nominal, we believe the potential is more significant if consumers gravitate toward the product,” the 5-star analyst said. “In our view, if this product becomes a more permanent fixture on KFC’s menu, it could represent as much as 10% of total sales for Beyond Meat.”

That said, should the product become a fixture on the menu later in the year or in 2023, the analyst says Beyond has “work to do to ensure the appropriate amount of supply is available for a more meaningful launch.”

There are about 3,943 KFC restaurants in the US, and Saleh estimates the average unit volume is in the $1.2 million to $1.3 million region, suggesting a “systemwide sales volume” of around $5 billion, far less than that of McDonald’s which generates domestic sales of around $45 billion based on roughly 12,500 units. Nevertheless, Saleh is “encouraged to see Beyond leveraging its quick service partnerships to expand distribution and build awareness of its offering.”

For now, however, due to “declining velocity trends in U.S. retail, weakening sales growth and uncertain financial outlook,” Saleh keeps a Neutral (i.e. Hold) rating for BYND shares with no fixed price target in mind. (To watch Saleh’s track record, click here)

The rest of the Street’s outlook offers contrary signals; on the one hand, the analyst consensus rates the stock a Moderate Sell, based on 6 Sells, 7 Holds and 1 solitary Buy. However, going by the $78.83 average target, shares will be adding 23% of muscle in the year ahead. (See Beyond Meat stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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