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On Monday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Oatly Group AB (NASDAQ:OTLY), reducing the price target to $32.00 from the previous $40.00 while maintaining an Outperform rating on the company’s shares. The adjustment follows a review of the milk alternatives market, where Oatly has shown resilience in sales performance, achieving 5.15% revenue growth over the last twelve months. According to InvestingPro data, analyst targets for the stock range from $10 to $49, suggesting significant potential upside from current levels.
The firm observed that while the U.S. market has seen varied results, milk alternative sales internationally have been robust, with a 4% increase in category sales, including a 4.4% rise in volume, despite a slight 0.4% drop in pricing. Oatly, in particular, has outpaced the category, registering a 7.5% sales increase against a challenging 16% comparable from the previous year. This was supported by a 7% volume growth, which compares favorably against a 14% comp, while pricing remained stable against the rest of the category, which experienced a 0.5% decrease. InvestingPro analysis reveals that despite this growth, the company faces significant challenges with cash burn and debt management, with 14 additional key insights available to subscribers.
Analysts highlighted Oatly’s market share gains, noting a 40 basis points increase in value share and a 30 basis points rise in volume share over a four-week period. Private label (PL) value share also showed consistent growth, with value up by 40 basis points and volume by an impressive 120 basis points.
The report also mentions that Nielsen data, which captures around 45% of Oatly’s Europe and International segment sales, suggests that there is potential for sales accretion from non-measured channels. This implies that Oatly’s actual market performance could be stronger than what current metrics indicate, given that a significant portion of its sales comes from channels not tracked in the Nielsen data.
Oatly’s stock price target has been recalibrated based on these observations, reflecting a cautious but still optimistic view of the company’s market position and growth prospects. The Outperform rating indicates that Mizuho Securities continues to see Oatly as a favorable investment despite the revised price target.
In other recent news, Oatly Group AB reported its fourth-quarter 2024 earnings, revealing a loss per share of -$0.15, which missed analyst expectations of -$0.07. The company’s revenue for the quarter stood at $214.32 million, slightly below the forecasted $218.6 million. Despite these misses, Oatly saw a significant improvement in its gross margin, which increased by 9.3 percentage points to 28.7%. Piper Sandler recently adjusted its price target for Oatly shares from $40 to $16, maintaining an Overweight rating, citing a reassessment of revenue growth prospects in North America. Barclays (LON:BARC) also revised its price target for Oatly to $1 from $2, while retaining an Overweight rating, noting the company’s strategic realignment to better reflect industry conditions. This strategic shift is anticipated to achieve a positive EBITDA by 2025, despite softer top-line growth projections. Oatly announced a strategic collaboration with Nespresso, which is expected to bolster its market presence. These developments reflect Oatly’s ongoing efforts to navigate market challenges and improve its financial health.
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