Global Plant-Based Trends Will Create Enduring Opportunity

Key Takeaways

• Accelerating supply chain and SG&A efficiencies, combined with brand reinvestment, are fueling faster-than-expected margin expansion and growth potential.
  
• Strong international channel growth, innovation, and sustainability positioning support outsized revenue gains and enduring leadership as global plant-based adoption rises.
  
• Mounting skepticism, regulatory pressures, profitability challenges, competitive threats, and weakening brand appeal threaten Oatly's growth, margins, and long-term earnings potential.

Catalysts

An oatmilk company, provides a range of plant-based dairy products made from oats in Europe, the Middle East, Africa, the Asia Pacific, Latin America, the United States, Canada, Mainland China, Hong Kong, and Taiwan.

• Analysts broadly agree that Oatly's supply chain and SG&A cost efficiencies will improve margins, but the ongoing eight consecutive quarters of cost-of-goods reductions signal a faster runway to gross and net margin expansion than anticipated, especially as additional, newly identified SG&A savings fuel reinvestment in branding and growth.
  
• While the analyst consensus sees international expansion and brand partnerships as catalysts for revenue growth, recent outsized traction in European foodservice, the successful expansion into high-growth markets like Spain and Mexico (with 70% and 40% year-on-year channel growth respectively), and viral consumer adoption (such as two-thirds of Paris cafes now offering Oatly) suggest the magnitude of top line growth and category leadership could materially exceed expectations as these playbooks scale globally.
  
• Oatly's innovation engine-rapid rollout of unique oat-based flavors, barista-centered SKUs, and on-trend launches like matcha and popcorn lattes-is driving incremental category creation, shelf space gains, and premiumization, positioning Oatly for sustainable increases in average selling prices and revenue per customer.
  
• The global movement toward plant-based diets for health, environmental and ethical reasons is still in its early innings; as mainstream adoption accelerates, Oatly is uniquely positioned to expand its addressable market and secure long-term, compounding growth across both mature and high-velocity emerging markets.
  
• Rising consumer and institutional focus on sustainability and carbon reduction gives Oatly, with its highly differentiated brand and oat-based, low-impact products, the potential to command durable pricing power, attract institutional buyers (such as schools and corporates), and structurally improve both top line growth and margin profile.

Oatly Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Oatly Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Oatly Group's revenue will grow by 6.3% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Oatly Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Oatly Group's profit margin will increase from -23.4% to the average US Food industry of 6.3% in 3 years.
• If Oatly Group's profit margin were to converge on the industry average, you could expect earnings to reach $62.2 million (and earnings per share of $2.07) by about August 2028, up from $-194.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.1x on those 2028 earnings, up from -2.5x today. This future PE is lower than the current PE for the US Food industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 0.54% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.54%, as per the Simply Wall St company report.

Oatly Group Future Earnings Per Share Growth

Risks

• Ongoing consumer skepticism toward ultra-processed foods, which now includes many plant-based products, could deter health-focused customers and slow oat milk category growth, thereby suppressing Oatly's revenue expansion over the long term.
  
• Growing environmental scrutiny and potential regulatory tightening about the sustainability and resource footprint of oat cultivation and processing may undermine Oatly's market positioning, leading to declining demand and greater compliance costs that could erode net margins.
  
• Oatly has a history of inconsistent profitability, as shown by its repeated adjusted EBITDA losses and reliance on continued cost-cutting measures, suggesting structural challenges in achieving sustainable positive earnings.
  
• Intensifying competition from major multinational food companies entering the plant-based and oat-milk segments threatens Oatly's pricing power and market share, likely resulting in margin compression and suppressed future revenues.
  
• The North America segment is experiencing ongoing volume declines for oat milk and the business is underperforming expectations, pointing to brand fatigue and a weakening of Oatly's early mover advantage, which could ultimately diminish both revenue and long-term earnings.

Valuation

• The assumed bullish price target for Oatly Group is $31.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Oatly Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $31.0, and the most bearish reporting a price target of just $10.2.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $994.1 million, earnings will come to $62.2 million, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 6.5%.
  
• Given the current share price of $16.51, the bullish analyst price target of $31.0 is 46.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.