D.A. Davidson analysts aren’t quite as excited about the new partnership between Beyond Meat Inc. /zigman2/quotes/211617595/composite BYND +1.88% and PepsiCo Inc. /zigman2/quotes/208744353/composite PEP +0.87% as investors were, downgrading the stock to underperform from neutral in a Wednesday note.
D.A. Davidson has a $135 price target on Beyond Meat.
Beyond Meat stock rallied 17.7% the day the announcement was made, and were up another 0.7% on Wednesday. Over the past year, Beyond Meat share have soared 52.4%, outpacing the benchmark S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.93% , which is up 16.2% for the period.
“[W]e think the rally is overdone,” wrote analysts led by Brian Holland.
The companies have entered into a joint venture called The PLANeT Partnership, LLC, which will leverage Beyond Meat’s plant-based protein capabilities with PepsiCo’s long history in snacks and beverages.
Pepsi shares closed up 1.2% after the news was announced, and are down 3.6% over the past year.
“In our search of all relevant Beyond Meat filings, transcripts, and presentations, we found no mention of ‘snack’ or ‘beverage’ as it pertains to the Beyond brand,” D.A. Davidson said.
“While that is not to dismiss the potential benefits borne out of the combination of these powerful businesses, we do question how soon this joint venture can bear fruit given the company had not previously discussed or referenced these segments as viable line extensions.”
Moreover, by analyst calculations, snacks and beverages would have to generate $700 million in sales by fiscal 2025 “to justify a $170 stock today.”
“[I]t is very difficult to underwrite an opportunity of that magnitude without more details,” analysts wrote.
Neither Beyond Meat or PepsiCo released financial details of the partnership.
Beyond Meat was downgraded before the partnership was announced, with BTIG growing cautious about the company’s growth prospects as restaurant chains turn their attention away from plant-based burgers and toward chicken sandwiches.