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Monday, DA Davidson analysts increased the price target on Oatly Group AB (NASDAQ:OTLY) shares to $17.00 from $15.00, maintaining a Buy rating. The firm’s analyst expressed optimism about the company’s trajectory towards achieving its first positive adjusted EBITDA in FY25, a significant milestone given the company’s current EBITDA of -$77 million. According to InvestingPro data, Oatly operates with a significant debt burden, which makes this profitability goal particularly crucial. This anticipation is supported by Oatly’s continuous improvements in supply chain efficiencies, including network optimization and volume absorption, as well as reductions in overhead costs.
The progress noted in the first quarter of FY25 has been significant, despite the broader challenges facing the plant-based beverage sector. While the company achieved 4.47% revenue growth in the last twelve months, InvestingPro analysis reveals the company is quickly burning through cash, with a concerning current ratio of 0.53. The analyst pointed out that the slowdown in the growth of plant-based beverage consumption has been a concern, but Oatly’s issues are partly due to internal missteps, such as losing their first-mover advantage, and partly due to the overall category’s performance.
Oatly, known for its oat-based dairy alternatives, has been working on streamlining operations and cutting costs. These efforts have started to bear fruit, as seen in the reported sequential progress during the first quarter of FY25. The company’s focus on improving supply chain and overhead expenses has been central to its strategy. For deeper insights into Oatly’s financial health and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US stocks.
The analyst’s comments suggest that while Oatly has faced setbacks, there is confidence in the company’s potential for growth. The raised price target reflects this optimistic outlook, with analyst targets ranging from $10.20 to $40.00, suggesting significant potential upside despite the company’s current market capitalization of $321 million. However, the reacceleration of growth in the plant-based beverage market has been more challenging than initially anticipated.
Oatly’s journey towards a positive adjusted EBITDA is being closely watched by investors and industry observers alike. The updated price target by DA Davidson signals a belief in the company’s ability to navigate through the current market dynamics and emerge stronger.
In other recent news, Oatly Group AB reported its fourth-quarter 2024 earnings, revealing a larger-than-expected loss per share of -$0.15, missing analyst forecasts of -$0.07. Revenue for the quarter was $214.32 million, slightly below the expected $218.6 million. Despite these misses, the company saw a significant expansion in gross margin, which improved by 9.3 percentage points to 28.7%. Analysts from Mizuho (NYSE:MFG), Piper Sandler, and Barclays (LON:BARC) have adjusted their price targets for Oatly, with Mizuho setting a target of $32, Piper Sandler at $16, and Barclays at $1, all while maintaining favorable ratings on the stock. These adjustments reflect varied expectations about Oatly’s growth prospects, particularly in the North American market, and strategic initiatives aimed at improving profitability. Piper Sandler noted a loss of distribution through Starbucks (NASDAQ:SBUX), which is expected to impact revenue, but the firm anticipates strong gross margin expansion as Oatly moves into 2025. Barclays highlighted Oatly’s strategic realignment to achieve a positive EBITDA by 2025, focusing on long-term financial health. Additionally, Oatly announced a strategic collaboration with Nespresso, which is expected to drive further growth and market presence.
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