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Barclays analysts are growing increasingly cautious on protein companies and claim “the worst is yet to come.” The trough for this cycle may not come in 2023, as many predict, but actually, in 2024/2025, they said in a note.
Along these lines, the analysts downgraded Tyson Foods (NYSE:TSN) to Underweight from Equal Weight with a price target of $58 per share, down from $89. The analysts don’t see enough chicken upside for TSN, at the same time when beef is contracting.
The move lower in TSN comes after the U.S. cattle/beef cycle analysis.
“Consumers globally are tightening their wallets, and we are seeing US consumers trading down to cheaper beef and chicken cuts, with some South American buyers switching out of these proteins entirely into eggs and beans, for example. Alternative meats may be less appealing for the same reason, given affordability issues. While inflation headwinds might abate in the medium term, we are modeling a further rise in ground beef prices to ~$6.50/lbs in 2025,” they said in a client note.
On the other hand, Beyond Meat (NASDAQ:BYND) has been downgraded on the back of deteriorating alternative meat economics. The lack of visibility also prompted the analysts to cut the price target to $10 per share, from $13.
“Although the company expects to turn cash flow positive by 2H23, we remain skeptical given current cash burn rates and a sizable net loss of over $100mn in 3Q22. Additionally, current market conditions create headwinds for BYND, as consumer trade downs and rising prices are affecting sales – a critical metric for a company looking to become cash flow positive in the near future, and a headwind to better operational leverage and thus improved pricing,” the analysts added.
Shares of Beyond Meat and TSN are down 3.3% and 2%, respectively, in pre-open Monday.
