Beyond Meat stock is overpriced beyond reason, says analyst who had Facebook IPO pegged

In the world of high finance, Erlan Abdikarimov is as small-time as they come. A 30-year-old stock analyst, he plies his trade in Kazakhstan, where he advises investors about local companies and initial public offerings in the United States.

So when Abdikarimov came out last week with a dire warning on Beyond Meat Inc., predicting shares would plunge, no one on Wall Street took much notice. After all, Beyond Meat is the hottest IPO the U.S. market has seen in more than a decade, with the El Segundo company’s stock price having more than tripled since its May 1 debut. Who was this guy to throw cold water?

As it turns out, he’s a guy with something of a track record. Back in 2012, Abdikarimov came out with an aggressively bearish call on Facebook Inc. before its IPO, setting the lowest target of anyone surveyed by Bloomberg and issuing a sell recommendation after shares started trading. That proved prescient: The stock tumbled 30% in its first year, briefly turning Abdikarimov into a bit of a star at the age of 24.

Now he’s waving clients off the maker of faux meat, which he sees as up against too much competition to be flying so high. The rally is “largely fueled by a speculative mood and not by a real assessment of the prospects,” said Abdikarimov, who has set a target of $28.40 on the stock, about one-third the current price. He cut his rating on the stock to “hold” from “buy” last week. “As soon as the first wave of speculative buying is over, we will see a correction.”

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Abdikarimov, who works in Almaty, Kazakhstan, for Freedom Finance JSC, the country’s biggest brokerage, is one of only three analysts who cover Beyond Meat at the moment. The other two have set price targets above $80.

At Tuesday’s closing price of $77.50 a share, the company is trading at more than 50 times its 2018 net revenue, after an IPO priced at $25. The stock made history with the strongest debut session since the financial crisis — soaring 163% — and was the best-performing equity in the U.S. last week. Buyers have piled in even as short interest skyrocketed to 44% of free float, according to financial analytics firm S3 Partners.

“The stock’s current price implies some very optimistic assumptions,” he said.

The analyst acknowledged that he’s at a disadvantage in terms of a super-comprehensive assessment, having, for one thing, never tasted Beyond Meat’s veggie burgers. They’re not available in Kazakhstan, where the cuisine revolves around actual meat and people are quite skeptical of substitutes. He has, however, heard good things about the product. “My colleagues in Moscow who’ve had them said it really is hard to tell the difference,” he said.

The fundamentals, though, have him predicting the company won’t be able to break even before 2025. A big factor is the competition, which is heating up, with giants such as Tyson Foods Inc. planning to launch meat-substitute products. Nestle has introduced a plant-based burger in Europe and will roll it out in the U.S. this fall. And Impossible Foods Inc. raised $300 million in its latest round, which values the company at $2 billion, according to Reuters.

In his five years with Freedom Finance, Abdikarimov has covered about 58 initial offerings. He has had hits and misses — the latter, recently, with Uber Technologies Inc. and Lyft Inc., whose post-IPO slides he didn’t see coming. He has buys on both but says he intends to revise them.

“Any IPO has its own speculative games. It could take from a few months to half a year or even a year for them to play out,” he said. Facebook, after all, came out of its rocky start nicely, having rallied about 390% since then.

Beyond Meat shares slid 10% on Tuesday.