Oatly Media Analysis Report
With the release of our 4Q23 Report in February 2024, we saw a fairly unanimous neutral to negative reaction from business media while the financial analyst community recognized our work to streamline operations and potential future growth. Analysts maintained their Buy ratings for the most part while the business media tended towards the dramatic especially with their headlines. MarketWatch went with “Oatly’s stock slides 10% after company’s loss more than doubles and it warns of another bad year” and the dek was “Oat-milk maker’s valuation has shrunk to $801 million, from $10 billion at the time of its 2021 IPO”. The coverage itself was fairly balanced, finally getting into the company’s growth and market potential in the latter paragraphs.
The street is recognizing our demonstrated financial improvement and promising future prospects as they see the market demand exploding, both at the consumer and the food service levels. Analysts recognize the brand equity we have worked hard to build. They also see the continued expansion of our product line, offering more and more ways for consumers to live a non-dairy lifestyle. The entire world is starting to look more carefully at their diets and how they can make them more healthy, and Oatly products are at the core of that transformation.
Investing.com took a much more neutral approach to our results, with the headline “Earnings call: Oatly outlines growth strategy, expects revenue rise in 2024“. We got points for achieving our first positive adjusted EBITDA month in the Americas segment, but were then dinged for the anticipated adjusted EBITDA loss for 2024, despite improvements. Other positive factors recognized included our strong results in Asia and our strong liquidity position and progress in improving free cash flow. A listed “miss” was discontinuing the construction of its production facilities in the US and UK, something we need to monitor carefully due to possible local negative media coverage.
Popular website tradingnews.com went with the Benzinga feed and the slightly humorous, dairy-related headline of “Oatly Shares Sour After Q4 Earnings Report, Despite Revenue Growth“. The article itself summarized the financial results but the lede highlighted that Oatly “faces investor sell-off after reporting wider Q4 loss per share of $(0.50), missing consensus estimates.” and that “Despite revenue beat, Oatly’s conservative 2024 outlook, projecting adjusted EBITDA loss of $35-$60 million, spurs stock plummet.” Motley Fool went with a more reactive headline, “Why Oatly Stock Was Sliding Today”. Despite our first positive EBITDA, they pointed out that revenue growth remained sluggish and Oatly continued to lose money, that once-promising growth markets have slowed down and that the company expects losses to continue into next year.
Green Queen, which calls itself the world’s leading food and climate media with a focus on future food innovation and food system decarbonization, had a very positive interpretation of our overall position even pointing out the food service market opportunities in their headline: “Oatly 2023 Earnings Reports: More Revenues, More Losses As Company Aims for Profitability with New Barista Milks”. While analyzing our results and financials, the article extensively goes into detail about new market possibilities, food service opportunities (especially the massive Starbucks / coffee sector) and highlights all the current and upcoming Oatly product offerings, with photos.
Analysts maintained their Buy ratings, focusing on the future possibilities rather than the past issues. In September, we saw Piper Sandler consumer sector analyst Michael Lavery maintain a Buy rating with a price target of $3.00, when the shares were trading at $0.90. Lavery is no newcomer to the Oatly bandwagon, having said this in 2021 in response to a negative report at the time from (then-short seller) Spruce Point Capital Management. “We believe Oatly’s brand equity and pricing power set it apart in the space, and believe it warrants a valuation premium. The TAM is significant, and we expect oat milk to continue gaining share. Its growth is limited by capacity, but we expect relief in the coming years, which also lifts margins (we estimate in-house production gross margins could be twice or more of those with co-manufacturers). Its ESG credentials are also strong (80% less carbon emissions, 60% less energy usage vs. cow’s milk).”
In a January 2023 interview with Yahoo! Finance Live, Mizuho Senior Consumer Equity Research Analyst John Baumgartner talked about being impressed with the company’s performance over 2023. “Firstly, the company has demonstrated consistent financial improvement, with Q3 adjusted EBITDA showing strong gains due to cost efficiencies. Furthermore, cash burn rate has improved for the second consecutive quarter, which indicates financial stability. Also, despite some irregularities in revenue due to strategic portfolio adjustments in Asia and customer mix shifts in the U.S. foodservice, U.S. retail distribution growth is promising.” His bullish stance looks like a long-term position as he re-issued his Buy rating in November 2023 and made additional comments about how the company is setting itself up for a positive EBITDA in 2024 and positive FCF in 2025.