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Beyond Meat is tanking and Wall Street analysts say there's a lot more pain to go

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Beyond Meat reports earnings miss & secondary—What pros say to watch

Wall Street analysts, normally a bullish bunch especially on recent IPOs, can't bring themselves to recommend buying Beyond Meat even as the stock tanked by double digits.

The alternative meat company reported mixed earnings and a secondary offering after the bell on Monday, causing the stock to drop more than 15% in early trading to $188.01.

The average price target of the three major analysts who came out with updated reports on the stock Tuesday is $163 a share, representing a drop of another 15% from its price in early market trading.

"We remain on the sidelines as valuation appears stretched at over 40x enterprise value/next twelve months sales, implying limited upside potential from a valuation perspective," Bernstein analyst Alexia Howard said.

"The question from here is whether the company can continue to deliver positive news that surprises to the upside," she said.

"We believe current valuation is pricing in the opportunity over the execution while not fully accounting for risks driven by competitor entrants into the market, potential penetration fatigue, success of unknown innovation and scaling capacity," a note from research firm Consumer Edge said.

The view was much the same from analysts at J.P. Morgan but the firm said fundamentals may be more important than valuation here.

"We continue to see BYND as a beat-and-raise story, one for which – at least in the near-term – fundamental momentum may matter more than valuation," they said.

Here's what analysts are saying about Beyond Meat's earnings report:

J.P. Morgan- Neutral rating, price target to $188 from $121

"We maintain our Neutral rating but raise our estimates and price target (the latter is migrating to December 2020 from December 2019). We continue to see BYND as a beat-and-raise story, one for which – at least in the near-term –fundamental momentum may matter more than valuation. With (a) short interest still hovering around 50% of the float at last measure (well above the group average of 6.8%), (b) Nielsen data getting better every week recently, and (c) 3Q likely to impress, we still view being negative on the stock as a risky proposition right now."

Bernstein- Market-perform rating, raising price target to $172 from $123

"We continue to expect significant growth potential in the plant-based meat category and believe that Beyond Meat is well positioned as one of the front-runners leading the new wave of plant-based meat products. In particular, as plant-based meat products tend to be relatively complex to manufacture, moats could prove to be deep.... However, we remain on the sidelines as valuation appears stretched at over 40x EV/NTM Sales, implying limited upside potential from a valuation perspective. The question from here is whether the company can continue to deliver positive news that surprises to the upside."

Consumer Edge- Equal weight rating, price target to $131 from $91

"Exiting Q2 FY'19 results, there is no change to our view the company is in the early innings of the plant-based meat revolution driven by increasing distribution gains, improved product formulations/relevant innovation, and consumer adoption, thereby significantly expanding its addressable market. That said, we believe current valuation is pricing in the opportunity over the execution while not fully accounting for risks driven by 1) competitor entrants into the market (namely Nestle with Incredible Burger, Impossible, and Tyson moving to retail later this year) 2) potential penetration fatigue 3) success of unknown innovation and 4) scaling capacity."