(Bloomberg) — 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 U.S.
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. Beyond Meat, after all, is the hottest IPO the U.S. market has seen in more than a decade, 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 as 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 64% below the current price. He cut the stock to hold from buy last week. “As soon as the first wave of speculative buying is over, we will see a correction.”
Beyond Meat shares fell 11% on Tuesday to $76.76 before slightly trimming losses. On Monday, the company said it will report first quarter earnings results after the market close on June 6.
Abdikarimov, who works in Almaty for Freedom Finance JSC, Kazakhstan’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 yesterday’s close of $86, the company was trading at about 59 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 sky-rocketed to 44% of free float, according to financial analytics firm S3 Partners.
“The stock’s current price implies some very optimistic assumptions,” Abdikarimov said.
The analyst acknowledges 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. However, he’s heard good things about the product. “My colleagues in Moscow who’ve had them said it really is hard to tell the difference.”
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 like Tyson Foods Inc. planning to launch meat-substitute products. Nestle SA has introduced a plant-based burger in Europe and will roll it out in the U.S. this fall. 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 said 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 from them to play out,” he said. Facebook, after all, came out of its rocky start nicely, having rallied about 390% since then.
(Updates with shares, earnings date in fifth paragraph.)
Beyond Meat Inc. shares were trading at $78.32 per share on Tuesday afternoon, down $7.77 (-9.03%). Year-to-date, Beyond Meat, Inc. (BYND - Get Rating) has gained 19.12%, versus a 15.14% rise in the benchmark S&P 500 index during the same period.
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