Oatly Group AB (NASDAQ:OTLY) Analysts Just Slashed Next Year's Revenue Estimates By 13%

The analysts covering Oatly Group AB (NASDAQ:OTLY) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the most recent consensus for Oatly Group from its 13 analysts is for revenues of US$968m in 2023 which, if met, would be a substantial 36% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 36% to US$0.38. Yet before this consensus update, the analysts had been forecasting revenues of US$1.1b and losses of US$0.35 per share in 2023. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Our analysis indicates that OTLY is potentially overvalued!

The consensus price target fell 11% to US$4.44, implicitly signalling that lower earnings per share are a leading indicator for Oatly Group's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Oatly Group analyst has a price target of US$7.00 per share, while the most pessimistic values it at US$2.10. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Oatly Group's revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 28% growth on an annualised basis. This is compared to a historical growth rate of 35% over the past three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 2.4% per year. So it's pretty clear that, while Oatly Group's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses next year, suggesting all may not be well at Oatly Group. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Overall, given the drastic downgrade to next year's forecasts, we'd be feeling a little more wary of Oatly Group going forwards.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Oatly Group's financials, such as a short cash runway. For more information, you can click here to discover this and the 1 other concern we've identified.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.