Beyond Meat, Inc. (BYND) shares fell about 5% during Monday's session after Wells Fargo initiated coverage on the stock with a Market Perform rating and a price target of $125 per share. Analyst John Baumgartner believes that Beyond Meat is well positioned to grow in the nascent plant-based meat alternatives space but cautions that its growth potential is fully discounted into the current valuation. He recommends waiting for increased visibility into the pace of market adoption and the competitive landscape before buying the stock.

Baumgartner expects a substantial private label push into the market, as well as new brands entering the space with innovative new products. With new plant structure and processing innovations on the horizon, the analyst believes that some new competitive products could be superior to the products that are already on the market. Despite these risks, the stock may be a risky short due to the potential for big name partnership announcements. The pilot project by McDonald's Corporation (MCD) in late September was a prime example of these risks, driving a single-day 11% jump for the stock.

Chart showing the share price performance of Beyond Meat, Inc. (BYND)

From a technical standpoint, Beyond Meat stock broke down from trendline resistance earlier this month. The relative strength index (RSI) fell into oversold territory with a reading of 29.03, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see a brief reprieve over the coming sessions before resuming its downtrend over the intermediate term.

Traders should watch for a move lower toward trendline support at the $100 level. A breakdown from those levels could lead the stock to retest its initial public offering (IPO) prices of around $50 over the intermediate term. If the stock rebounds higher, traders could see a move to test the 50-day moving average at $152.83 or prior highs of about $240 over the long term, although that scenario appears less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.