Shares of Beyond Meat (NASDAQ:BYND) got crushed today, closing down 8%, after receiving a downgrade from Wall Street. UBS cut its rating on the plant-based meat substitute maker to sell.
UBS had initiated coverage in November with a neutral rating, but today cut that rating to sell while also slashing its price target from $90 to $73. As of Friday's close, the stock had already more than doubled from recent lows set in March.
At the same time, Beyond Meat faces disproportionate risk exposure to the COVID-19 pandemic, as many restaurants have been shut down amid the public health crisis. Over half (51%) of revenue comes from restaurants and food service, which represents Beyond Meat's "greatest channel risk exposure," according to analyst Steven Strycula.
The novel coronavirus outbreak is very likely to cause a global recession, and many small businesses like restaurants will bear the brunt of those impacts. Even national chains, many of which have partnered with Beyond Meat to introduce new menu items, won't see sales fully recover for quite some time. Strycula argues that the "full economic benefit" of key partnerships like McDonald's and Starbucks were already priced in at $110 per share (approximately where the stock closed on Friday).
Meanwhile, competition from Impossible Foods is intensifying. Earlier this month, Impossible announced new distribution deals at major grocery store chains. That will put pressure on Beyond Meat's retail sales, which account for the other 49% of the business, UBS contends.