By Sam Boughedda
Mizuho Securities upgraded shares of Oatly (NASDAQ:OTLY) to Buy from Neutral, raising the price target to $6 from $2.50 per share in a note to clients.
The upgrade has boosted Oatly shares, which are up more than 7% following the Mizuho note.
Mizuho analysts said the bearish sentiment for the stock has peaked, and demand is resilient, resulting in it being bullish for structural growth.
"Our discussions with investors indicate skepticism for nearly anything 'plant-based' given growth travails for plant meat. However, we remain bullish for secular growth of PBBs and 2022 reinforced our confidence," wrote the analysts.
"Category sales were +10% and elasticity was -0.2 (despite up to +17% pricing); similar to soft drinks, fresh milk, and bottled water. We maintain our global CAGR for PBBs sales through 2027E (+9%) and prefer oats vs. competing varieties (almond, soy) given cultural acceptance, costs of production/low input crop, and functionality. We believe such merits are not appropriately priced into Street ests and valuation," they added.
The analysts also applauded Oatly's manufacturing deal with Canada's Ya YA Foods and its emphasis on hybrid manufacturing.
"We see similar optionality for planned facilities in Peterborough, UK (2024/2025) and Asia (2024). It is not unusual to utilize external co-manufacturer specialists for aseptic-packaged products (ready-to-drink nutrition shakes as an example) and, aside from the unexpected strategic shift and sunk costs, hybrid is sensible for OTLY," argue the analysts.