Shares of Beyond Meat (BYND) are under pressure on Thursday after Goldman Sachs analyst Adam Samuelson downgraded the stock to Sell from Neutral. He believes it represents one of the stocks that is most directly impacted by the COVID-19 outbreak, with over half of its sales into the foodservice channel. The analyst argued that shares could fall 42%, slashing his price target for Beyond Meat to $39 from $129.

SELL BEYOND MEAT: In a research note to investors, Goldman Sachs analyst Adam Samuelson downgraded Beyond Meat to Sell from Neutral and drastically cut his price target to $39 from $129, which he noted represents 42% downside in comparison to the average 33% upside for his coverage. Beyond Meat represents one of the stocks that is most directly impacted by the COVID-19 outbreak, with over half of its sales into the foodservice channel, Samuelson argued. The analyst believes traffic declines represent a "substantial" near-term sales headwind and sees "meaningful risk" to further foodservice distribution gains in the near-to-medium term, with plant-based menu innovation a "substantially lower priority" for operators in the current environment.

Samuelson argued that he sees scope for further underperformance ahead as investors recalibrate the pace of both underlying traffic trends and new distribution wins on the future growth trajectory. International expansion was expected to be a critical component of Beyond Meat’s growth in 2020, with its first offshore production scheduled to open in the Netherlands by the end of the first quarter, he noted. With restrictions on cross-border trade in Europe in response to COVID-19, the analyst expects the benefits of this expansion on incremental retail sell-through and foodservice expansion to be more limited in 2020.

Meanwhile, Goldman Sacks’ Samuelson also upgraded Nutrien (NTR) to Buy from Neutral, Ingredion (INGR) to Neutral from Sell, and Hormel Foods (HRL) to Neutral from Sell.

WHAT'S NOTABLE: Last week, Bank of America analyst Bryan Spillane also downgraded Beyond Meat to Underperform from Neutral with a price target of $50, down from $126. The analyst argued that Beyond Meat's "significant" exposure to the foodservice sector, which represented 51% of sales in 2019, and its "premium" valuation multiple position the company to underperform the broader food and beverage sector during this market correction. Beyond Meat's 51% exposure to the foodservice category compares to a 20% average across the food and beverage sector, according to the analyst. Spillane expects "significant slowing" in the global foodservice sector as a result of the COVID-19 outbreak.

PRICE ACTION: In morning trading, shares of Beyond Meat have dropped about 6% to $68.40.