Shares of imitation-meat producer Beyond Meat (NASDAQ:BYND) have been crashing for the past few months, a sign that the euphoria around the trendy processed food company is fading. The stock price decline was hastened on Friday when Bernstein slashed its price target from $172 to $130.
Beyond Meat stock was down 6.4% by market close on Friday. Since peaking in late July, shares are now down a whopping 53%.
Bernstein still expects Beyond Meat to beat its revenue guidance of $240 million this year, driven by partnerships with restaurants and meal kit companies. But concerns about competition are very real. Bernstein lowered its assumption for the enterprise-value-to-sales ratio, prompting the price-target cut.
Beyond Meat is facing an onslaught of competition in the grocery store. Impossible Foods has begun rolling out its products to select stores; Kroger is launching a lineup of private-label faux meat products; Kellogg's Incogmeato brand will soon show up in the refrigerated and freezer sections. The list goes on.
With so much competition on the way, Beyond Meat's stratospheric valuation is tough to justify. The company is still worth around $6.6 billion, good for a price-to-sales ratio of roughly 27 based on its 2019 guidance. Sales will need to grow quickly for many years for the fundamentals to catch up to the valuation.
While Bernstein rates Beyond Meat as neutral, its lower price target is still well above where the stock trades today. If shares keep falling, another price-target cut down the line wouldn't be out of the question.