Shares of Beyond Meat (BYND) are on the rise on Tuesday after the company announced an expansion in its relationship with Walmart (WMT), with the latter planning to triple availability of the Beyond Burger in its stores beginning next week. Commenting on the news, Wells Fargo analyst John Baumgartner told investors he would take profits on Beyond Meat following the announcement as he believes competition is increasing in the alt-meat space while prices are softening. In separate new for Walmart, the retail giant is said to be in advanced talks to invest up to $25B in India-based conglomerate Tata Group's "super app."
BEYOND MEAT EXPANDS WALMART DISTRIBUTION: Beyond Meat has announced an expansion in its long-standing relationship with Walmart. "Following this summer's successful launch of the Cookout Classic value pack, Beyond Meat's most affordable product offering to date, this fall, Walmart plans to triple availability of the Beyond Burger from approximately 800 locations to more than 2,400 stores nationwide beginning next week. The move comes as part of Beyond Meat's effort to increase worldwide accessibility to simple, plant-based meat products made without GMOs," the company said.
Following the announcement, the Twitter account @WallStCynic, which is believed to be the account of Jim Chanos of Kynikos Associates, tweeted that Beyond Meat "already announced the expansion of the $WMT distribution on your August 4th earnings conference call."
Meanwhile, Wells Fargo analyst John Baumgartner told investors in a research note that he would take profits on Beyond Meat following the news that Walmart will expand availability of the Beyond Burger. While Nielsen data shows that demand is stabilizing for the plant-based meat category, he also sees competition increasing and prices softening. Baumgartner has an Underweight rating on Beyond Meat shares.
INVESTMENT IN TATA'S 'SUPER APP': Walmart is said to be in advanced talks to invest up to $25B in India-based conglomerate Tata Group's "super app," Mint's Anirudh Laskar reported, citing two people familiar with the matter. The app is set to launch in December or January, and would offer a wide range of products sold by Tata's consumer business. According to one of the people, the Walmart investment "could touch $20B-$25B eventually for a large stake in the proposed super app to be hosted under a Tata Sons subsidiary."
Commenting on the news, Wells Fargo analyst Edward Kelly told investors that Walmart's interest in India looks to be accelerating. The super app is expected to launch in December 2020/January 2021 and will combine Tata's consumer product offerings onto one platform, he added. Kelly pointed out that news sources indicate that the super app may be launched as a joint venture that would leverage Tata's e-commerce business and Flipkart. Kelly also noted that Walmart made another $1.2B investment in Flipkart in July, roughly two years after purchasing an almost 80% stake in 2018 for $16B.
"It's clear that some initial operational and regulatory challenges have not deterred the company's interest in this massive market," he said. The analyst views the news as mixed for now. While a path to value creation in Flipkart looks to be evolving positively given the potential for a future IPO, and he applauds management's willingness to think outside the box, doubling down on this complicated market is not without risk. Kelly has an Equal Weight rating and a price target of $130 on Walmart shares.
PRICE ACTION: In morning trading, shares of Beyond Meat have gained over 11% to $168.29, while Walmart's stock is fractionally down at $136.73
