(Bloomberg) – In the world of high finance, Erlan Abdikarimov is as small as they come. A 30-year stock analyst, he works in Kazakhstan, where he advises investors on local companies and initial public offerings in the US.
So when Abdikarimov came out last week with a terrible warning about Beyond Meat Inc., the stock forecast would fall, no one on Wall Street noticed much. Beyond Meat, after all, is the hottest IPO the US market has seen in more than a decade, having more than tripled since its May 1 debut. Who was this guy to play cold water?
Turns out he's a guy with a track record. In 2012, Abdikarimov filed an aggressively low call on Facebook Inc. prior to its IPO, setting the lowest target of anyone surveyed by Bloomberg and issuing a sell recommendation after the shares began trading. This proved to be foreknowledge, as shares plummeted 30% in their first year, briefly turning Abdikarimov into a star at age 24.
Now he's waving to the fake meat maker's customers, which he sees as competing too much to fly that high. The rally is "largely fueled by a speculative mood and not by a real assessment of the outlook," said Abdikarimov, who set a target of $ 28.40 on stocks, about 64 percent below the current price. He cut the stock to hold for purchase last week. "As soon as the first wave of speculative shopping is over, we'll see a correction."
In addition, Meat shares fell 11% on Tuesday to $ 76.76, before easing losses slightly. On Monday, the company said it will release its first-quarter results after the market closes on June 6.
Abdikarimov, who works in Almaty for Freedom Finance JSC, Kazakhstan's largest brokerage firm, is one of only three analysts to cover Beyond Meat at the moment. The other two set price targets above $ 80.
At the close of yesterday's $ 86 trading session, the company was trading around 59 times its 2018 net income after a $ 25 IPO. The stock made history with its strongest debut since the financial crisis – up 163% – and it was the best participation in the United States last week. Buyers have accumulated even with short interest rates rising rapidly to 44% of free float, according to financial analyst firm S3 Partners.
"The current stock price implies some very optimistic assumptions," Abdikarimov said.
The analyst acknowledges that he is at a disadvantage in terms of a super-comprehensive assessment, having, on the one hand, never tasted Beyond Meat's vegetarian burgers. They are not available in Kazakhstan, where cuisine revolves around meat and people are rather skeptical of substitutes. However, he heard good things about the product. "My colleagues in Moscow who said that it is difficult to tell the difference."
The fundamentals, however, make him predict that the company will not be able to break before 2025. A big factor is the competition, which is heating up, with giants like Tyson Foods Inc. planning to launch meat substitutes. Nestlé SA has introduced a vegetable-based hamburger in Europe and will launch in the US 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 covered about 58 initial offers. He had successes and mistakes – the latter recently with Uber Technologies Inc. and Lyft Inc., whose post-IPO slides he did not see coming. He buys the two, but says he wants to review them.
"Any IPO has its own speculative games. It may take a few months to half a year or even a year of them to throw away, "he said. Facebook, after all, went quite well, having risen about 390% since then.
(Updates with shares, earnings date in the fifth paragraph).
To contact the reporter in this story: Tatiana Darie in New York at [email protected]
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "For more articles like this, please visit us in bloomberg.com"data-reactid =" 26 "> For more articles like this, please visit us at bloomberg.com
© 2019 Bloomberg L.P.