On Thursday, Oatly Group AB (NASDAQ:OTLY), a producer of plant-based dairy alternatives, received a positive outlook from DA Davidson, initiating coverage with a Buy rating and setting a price target of $1.50. The firm's analysis suggests that the long-term growth prospects for plant-based milk outweigh the current price competition with traditional cow's milk.
The analyst highlighted Oatly's strong marketing capabilities, noting that the brand has achieved significant global recognition. This strength is seen as a key driver for the company's future success. The shift from a self-manufacturing strategy, which has been a challenge since the company's initial public offering (IPO) in May 2021, is also viewed as a positive step toward addressing past issues.
Despite acknowledging some concerns such as negative EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow, as well as stock liquidity issues, DA Davidson sees potential in Oatly's financial improvements. The firm believes that with visible progress in revenue and EBITDA, Oatly's stock presents an opportunity for investors.
Oatly has been navigating the competitive plant-based dairy sector since its IPO and has been working to strengthen its financial position. The endorsement from DA Davidson reflects confidence in the company's strategic changes and its ability to capitalize on the growing demand for plant-based milk alternatives.
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