An analyst that loves Beyond Meat's business still thinks the stock is wildly overpriced - and he's urging traders to sell

Sydney Kramer

• Brian Holland, the latest analyst to initiate coverage of Beyond Meat, likes the company but thinks it's overvalued at currently. He's only the second analyst to recommend selling the stock.
• He thinks Beyond is overshooting its forecasts for how much market share it can capture from traditional meat.
• Still, he likes the potential in plant-based meat and says Beyond Meat has a distinct first mover advantage.
• Watch Beyond Meat trade live on Markets Insider.

The latest Wall Street analyst to weigh in on Beyond Meat thinks highly of the company and plant-based meat, but still thinks that at the current price it's a good time to sell.

Holland initiated coverage in September with an underweight rating a price target of $130, a 15% discount from where Beyond currently trades. Holland says he believes in plant-based meat, just not Beyond's more than $9 billion valuation.

His price target is based off a five-year sales outlook plus a 50% premium to growth staples because of the long runway for plant-based meat.

"I think it's going to be a tremendous category is going to be one of the fastest growing categories in food," Brian Holland, a senior analyst at D.A. Davidson, told Markets Insider in an interview. "But I think there are limiting factors" to Beyond Meat's growth, he said.

Wall Street has been very hesitant on Beyond Meat during the short time its traded publicly - the company IPOed in May. Of the 10 analysts that cover the shares, seven have neutral ratings on the company. Only one analyst - Ken Goldman of JPMorgan- has a buy rating on shares. When Holland initiated coverage, he became the second "sell" rating.

In a recent investor presentation, Beyond Meat spelled out plans to capture 13% of the US market share of traditional meat, about $35 billion of the $270 billion industry in the US. The company arrived at this number by calculating how much of the dairy milk market has been captured by plant-based milk.

Read more: These are Beyond Meat's 13 highest-profile partnerships in the food industry

But Holland is skeptical that Beyond can woo enough repeat consumers to grow that much.

"At the end of the day when you sell a food product, you only have the attention span of the consumer for as long as they have your package in their refrigerator or eating your sandwich at a restaurant," Holland said.

After that, its can be difficult to keep consumers engaged. He argues that plant-based milk has been able to do this because there's a solid share of lactose intolerant people in the US, a need for an alternative that Beyond doesn't have.

There's also healthy competition in the plant-based meat space, and because of that Beyond's valuation "demands higher barriers to entry than do exist here," he said. A number of other companies have recently gotten in the plant-based meat game, including larger food companies such as Tyson Foods, Hormel Foods, and Kellogg.

That said, Holland thinks Beyond Meat has a distinct first-mover advantage in plant-based meat. A majority of the plant-based milk category is controlled by two top players, Holland said, who were early movers - Danone, which owns Silk, and Blue Diamond, which owns Almond Breeze.

Going forward, Holland said that he's open to reevaluating his rating. "I don't think any stock is permanently a buy or sell," he said. If the numbers were revised higher, "we would look at what the math said," Holland said.

He also acknowledged that a deal with McDonald's would change things for Beyond - analysts have said it could boost the stock price as much as 30% and would represent a huge win for the company, which has a lot of partnerships with restaurants.

Beyond Meat's shares are up 516% year to date.

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