What happened

In the final half-hour of Wednesday trading, shares of meat-substitute maker Beyond Meat (NASDAQ:BYND) were 5.7% lower after investment bank Piper Sandler (NYSE:PIPR) downgraded the stock to neutral and cut its price target to $125 a share.

So what

As StreetInsider.com reports, Piper Sandler acknowledges Beyond Meat's position as "an early leader in plant-based meat," and says it still believes this could be a $6 billion to $8 billion market by 2025. 

The problem is that, in Piper Sandler's opinion, Beyond Meat is losing momentum and failing to capitalize on this emerging market as well as might be hoped. Fourth-quarter 2020 earnings aren't due out until March 1, but already, the analyst warns, Beyond Meat's retail momentum lags consensus expectations in the quarter, putting the company at risk of falling short of analyst estimates for both sales and earnings.  

Simple red arrow declining stock chart on a white checked background

Image source: Getty Images.

Now what

For the time being, Piper Sandler is standing pat on its prediction that Beyond Meat will do $395 million in fiscal 2020 sales, a conservative number that is below the $411 million that most analysts are calling for. Nevertheless, seeing the possibility of "under-shipments" in the fourth quarter, Piper Sandler is cutting its forecast for 2021 sales to just $590 million, down from $670 million previously, and below the consensus target of almost $630 million.  

For earnings, most analysts agree that Beyond Meat will probably report a net loss for fiscal 2020, and Piper Sandler's lower-than-average prediction for sales suggests the earnings loss could be a lot worse than the $0.31 per share forecast elsewhere. So Piper Sandler is predicting an earnings miss -- and potentially a big one.

Judging from the stock price action, it seems many investors aren't interested in waiting around till March to see if Piper is right. They're selling first, and asking questions afterwards.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.