Beyond Meat (BYND) shares tumbled in pre-market trading Tuesday, setting the stock up for its biggest single-day decline since listing on the Nasdaq last month, after analysts at JPMorgan cut their rating on the stock amid concerns for its sky-high $10 billion valuation.
JPMorgan said that while it still thinks Street estimates for sales and earnings from the plant-based food group are too conservative, and that its potential addressable market in the alternative meat market remains compelling, the embedded value in Beyond Meat shares, which have risen more than 570% since debuting on May 3, is now priced into the year's hottest IPO. JPMorgan cut its rating on the stock to neutral from overweight, but bumped its price target by $1 to $121 per share.
"With a valuation this elevated, any hiccup in performance -- real or perceived -- could lead to a meaningful correction in the share price," JPMorgan analyst Ken Goldman wrote. "We do not think an Underweight rating is appropriate at this time. Yes, our price target indicates downside risk; however, it is built on a DCF that models the long-term growth story. It is risky to short Beyond Meat, in our view, given that 2019 financials are likely to exceed Street expectations."