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Wall Street Skeptics Balk At Beyond Meat's Valuation

Wall Street Balks At Beyond Meat's Valuation

Plant-based meat maker Beyond Meat has surged about 225 percent since going public last week, leading one analyst to call the valuation "absurd."

"The valuation, by any metric, is out of control," said Atlanta-based Harrington Alpha Fund Founder Bruce Cox, according to Bloomberg. "It will definitely roll over … it’s a matter of when."

Last month, it was reported that Beyond Meat was looking to raise up to $183.8 million from the IPO. The company plans to use most of the proceeds for research and development, and to build out manufacturing facilities.

Cox, who was previously senior vice president of investments at Stifel, initiated a short position in the stock on Wednesday (May 8), calling prices in the $40s – where it opened in its first day of trading – as more reasonable. He also believes that sell-side analysts will eventually recommend that clients not buy shares at these high levels.

Beyond Meat shares fell as much as 4.8 percent on Wednesday.

While traders surveyed by Bloomberg News revealed they have been quoted borrow fees of 36 percent to 111 percent, Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners, pointed out that data points are currently incomplete and will be more reliable within a few days. The stock has already received two very different, but bullish, initiations from Freedom Finance and Bernstein, with price targets of $28 and $81, respectively.

And while Beyond Market has competition in its space, notably Tyson Foods, Bernstein Analyst Alexia Howard believes that growing consumer demand means there is plenty of room for multiple players. In fact, she predicted the total market could reach about $40.5 billion in the U.S. over the next decade. That means if Beyond Meat can grow its market share to 5 percent from its current 2 percent, the company would hit $2 billion in sales in 2028. The company posted revenue of $87.9 million last year.

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