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Beyond Meat dives 25% after lead underwriter JP Morgan downgrades: 'Beyond our price target'

Key Points
  • "We believe the company's growth opportunity, strong management, and near-term ability to post financials that exceed Street expectations are balanced by elevated valuation metrics," J.P. Morgan said.
  • "We remain highly favorable to the total addressable market for alternative meat and Beyond Meat’s role within it," the firm said.
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J.P. Morgan downgraded Beyond Meat on Tuesday, after the company's stock surged more than 600% from its initial public offering price of $25 through its high on Monday.

The firm, which was a lead underwriter for the red hot May IPO, downgraded the stock to "neutral" from "overweight" and kept its price target of $120. The alternative meat company reported stronger-than-expected earnings last week — its first report since going public.

The stock is "beyond our price target," J.P. Morgan analyst Ken Goldman said in the note to clients. The share price has already exceeded the price target of every analyst on Wall Street and short sellers have lost more than $400 million betting against the plant-based burger maker's stock since it went public, according to research firm S3 Partners.

"This downgrade is purely a valuation call," Goldman said. "As we wrote last week, 'At some point, the extraordinary revenue and profit potential embedded in BYND… will be priced in' – we think this day has arrived."

Shares of Beyond Meat fell 25% to $126.04 on Tuesday following the downgrade. While investment banking and analyst research are separate units at major firms, investors likely still found it surprising that the lead underwriter would downgrade one of the companies it took public this early.

The company also announced on Tuesday that this week it will launch a "meatier" version of its plant-based burger.

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Key Points
  • Even the highest price target on Wall Street from Friday was immediately outpaced when Beyond Meat's stock began trading Monday.
  • Beyond Meat's stock is over 65% above the average Wall Street 12-month price target of $103.85 a share.
  • Shares of the alternative meat company jumped more than 600% from the initial public offering price of $25 a share during intraday trading Monday.