On Wednesday, CFRA made adjustments to its price target and earnings projections for Oatly Group AB (NASDAQ:OTLY), the plant-based milk company. The firm has reduced its 12-month price target to $1.20, a decrease from the previous $1.30, while reaffirming its Hold rating on the stock.
The new price target is based on an enterprise value (EV) to sales multiple of 1.2 times CFRA's 2024 sales estimate for Oatly, which has been revised down to $837 million from $847 million. Despite this reduction, the firm has increased its earnings per share (EPS) estimate for 2024 to -$0.24 from -$0.27, while decreasing the 2025 EPS forecast to -$0.16 from -$0.14.
Oatly's second-quarter revenue reached $202 million, marking a 3% year-over-year increase and coming in $1 million above the consensus. The company experienced organic sales growth of 3.9%, driven by a 9.6% increase in volume, although this was partially offset by a 5.7% decline in volume/mix.
Notably, Oatly saw a significant 26% year-over-year volume increase in the Greater China segment, largely attributed to a promotional campaign with Luckin Coffee (OTC:LKNCY), China's largest coffee chain.
The company's adjusted EBITDA for the quarter was -$11 million, surpassing consensus estimates by approximately $4 million and showing an improvement of about $2 million from the first quarter of 2024. Still, Oatly's cash burn remains a point of concern, with $67 million spent this quarter.
The company reported approximately $335 million in total liquidity, comprising $143 million in cash and a $192 million revolving credit facility, a decrease from $401 million in the first quarter of 2024.
In summary, CFRA acknowledges Oatly's strong performance in the first half of the year but expresses caution due to the ongoing cash burn, leading to the decision to maintain a Hold rating while adjusting the price target and EPS estimates.
In other recent news, Oatly Group AB has reported encouraging developments. The plant-based dairy alternative producer recently announced its first quarter results for 2024, showing a 3% volume increase and significant gross margin expansion.
Despite challenges in the Greater China market, Oatly experienced solid growth in Europe and North America. The company's adjusted EBITDA loss narrowed significantly to $13 million, a substantial improvement from the previous year.
RBC Capital maintained its Sector Perform rating on Oatly with a steady price target of $1.05, while Jefferies adjusted their price target for Oatly to $2.83, maintaining a buy rating. Both firms believe that Oatly's current path aligns with market expectations. These recent developments reflect Oatly's focus on expanding its market presence while enhancing profitability through careful cost management.
Despite the minor setback in China, Oatly is making progress that aligns with analyst expectations for the stock's potential. The company's commitment to driving revenue growth while simultaneously working on margin expansion is a point of emphasis for both RBC Capital and Jefferies in their assessments.
InvestingPro Insights
In light of CFRA's updated analysis on Oatly Group AB (NASDAQ:OTLY), a closer look at real-time data and InvestingPro Tips can offer additional context for investors. With a current market capitalization of $594.81 million, Oatly's financial health is under scrutiny. The company's price-to-book ratio stands at 2.1 as of the last twelve months ending Q1 2023, providing a measure of the market's valuation of the company relative to its book value.
Despite a modest revenue growth of 4.68% during the same period, Oatly's financial challenges are underscored by a negative price-to-earnings (P/E) ratio of -1.9, reflecting the market's concerns about its profitability.
InvestingPro Tips highlight that Oatly may struggle with making interest payments on its debt and is quickly burning through cash, which aligns with CFRA's caution regarding the company's cash burn. Moreover, the stock's volatility and the fact that short-term obligations exceed its liquid assets could be critical factors for potential investors to consider. With analysts not expecting the company to be profitable this year, these insights can be crucial for making informed decisions.
For those looking to delve deeper into Oatly's financials and future outlook, InvestingPro offers a range of additional tips, with 9 more available. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing access to comprehensive analysis and data to navigate the complexities of the market.
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