Oatly's Improving Financials Instill Hope For Plant-Based Dairy Growth, But Cash Flow Concerns Linger: Analyst

J.P. Morgan analyst Ken Goldman reiterated a Neutral rating on the shares of Oatly Group AB OTLY with no price target.

The analyst has updated the estimates following fourth-quarter FY24 earnings and the issuance of 2025 guidance.

The company reported its fourth-quarter results, showcasing a solid 5.0% growth in revenue, reaching $214.3 million compared to the same period last year. Constant currency revenue increased by 4.7%, driven by consistent volume growth across all operational segments.

The company said its performance in the quarter reflects continued expansion despite facing challenges from its supply chain evaluations.

Gross margin also saw significant improvement, rising to 28.8%, a notable 5.4 percentage points higher than the previous year.

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In terms of profitability, the company posted a reduced net loss of $91.2 million for the quarter, an improvement over the $298.7 million loss recorded during the same period last year.

Looking ahead, the company expects its first full year of profitable growth in 2025. Projections for 2025 include a constant currency revenue increase of 2% to 4%.

Adjusted EBITDA is expected to range from $5 million to $15 million, with capital expenditures forecasted to be between $30 million and $35 million.

The analyst has revised the adjusted EPS loss estimate for FY25 to $3.68 and FY26 to $3.43.

On the positive side, the analyst is optimistic about the long-term growth prospects for plant-based dairy, the opportunity for oat milk to capture market share from almond and other alternatives, and Oatly’s strong positioning and brand recognition within the sector.

Meanwhile, there are concerns, such as limited visibility into the performance of its emerging markets, OTLY continuing to operate with negative cash flow, and the potential for the category to be perceived as a commodity by both consumers and investors.

Price Action: OATLY shares traded lower by 1.72% at $8.54 at last check Tuesday.

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