Oatly Plunges 21% After Q3 Revenue Miss

World’s largest original oat drink company Oatly Group AB (OTLY) delivered mixed third-quarter results with revenue missing expectations, and earnings beating expectations.

Shares plunged 20.8% after the company outlined production challenges related to COVID-19 closures, supply chain issues, and temporary disruptions at some of Oatly’s production facilities.

The company’s lowered revenue guidance also failed to meet expectations. Shares of the dairy alternative oat-based products supplier closed at $9.36 on November 15.

Mixed Results

Backed by growing demand for its products across geographies and sales channels, Oatly’s revenue increased 49.2% year-over-year to $171.06 million. However, revenue fell short of analysts’ estimates of $185.95 million.

The revenue growth was aided by additional supply from a new production facility in Vlissingen, Netherlands, to meet the growing demand for Oatly’s products worldwide. However, these were offset by lower production in Utah due to temporary mechanical and automation issues, COVID-19 related closures in Asia, and truck driver shortage in the U.K.

On a positive note, quarterly loss stood at 7 cents per share, better than analysts’ estimated loss of 9 cents per share, yet higher than the prior-year quarter loss of 2 cents per share.

Management Comments

Toni Petersson, Oatly’s CEO, said, “We’re pleased with our ability to continue to be a leader in driving growth and sales velocity for the plant-based milk category within our key markets. This positive momentum was partially offset by temporary headwinds as we scale our global production capacity, particularly in Ogden, Utah, and as we manage through COVID-19 Delta-variant related restrictions and temporary foodservice closures in Asia.”

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Missed Guidance

Based on the ongoing supply chain issues, COVID-19 related closures in Asia, and temporary production problems at certain plants, OTLY guided full-year fiscal 2021 revenue to exceed $635 million; however, the consensus estimate is pegged much higher at $694 million.

Analysts’ View

In response to Oatly’s quarterly performance, Jefferies analyst Robert Dickerson maintained a Buy rating on the stock with a price target of $26, which implies a whopping 177.8% upside potential to current levels.  

Dickerson noted, “FY’21 sales guidance revised to >$635mm (vs. >$690mm prior), which implies Q4’21 sales of >$178mm vs $222mm consensus. Capex lowered, while ’21 production volume was unchanged. Stock to be pressured given sales results/ guide and North America operating profit pressure.”

Overall, the stock commands a Strong Buy consensus rating based on 8 Buys and 1 Hold. The average Oatly Group price target of $24.56 implies 162.39% upside potential to current levels. However, shares have lost 53.7% over the past year.

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