Laurent Grandet, Guggenheim Securities Managing Director and Equity Analyst joins the Yahoo Finance Live panel to discuss what’s next for Oatly’s stock.
ZACK GUZMAN: Want to check out one of those names in the sustainable food space. We've been watching trading quite hot after their debut earlier in May. That would be Oatly. The Wall Street firm is coming out with a smattering of coverage there.
We got a mixed range. You could see Oatly's stock down by about 6% in today's session. JP Morgan coming out at the lower end, with a $24 price target, saying the competition in the space was probably going to increase-- we've seen that before-- in sustainability when it comes to food. But also, you got Guggenheim, the second highest rating. Only to Jefferies at $34 a share up there on Oatly.
So I want to bring in an analyst there at Guggenheim who has a price target to $32 here. Laurent Grandet, Guggenheim Securities managing director and equity analyst, joins us right now. And Laurent, when we look at Oatly, it's hard maybe not to compare to their other, I guess, other sustainability partner here in the food space, Beyond Meat. But talk to me about what has you so excited about the future for Oatly, and what you see ahead.
LAURENT GRANDET: Yeah, Simon. Thanks for inviting me. And there are a few things here. I mean, [INAUDIBLE] Oatly is a very unique company with very definitely growing market positions. Really relying on three different elements first. First is on sustainability. I mean, that's the only company that's, I mean, so strong, a message around sustainability. It's all about what they do.
The second thing is a science based on manufacturing, competitive advantage we see. And then finally, the disruptive marketing is a unique in-your-face brand message to challenge the status quo. So those are kind of the secret sauce of Oatly.
And I think what should give confidence and comfort to investors is actually the concept has been proven right across three continents. Over the last three years, the brand is expanding from Sweden to the UK and in Germany, in Europe and the US and China, where actually oats were a very small piece of the business actually in China. It was not even [INAUDIBLE], including [INAUDIBLE]. So they proved the concept, which I think is really strong for us.
- In addition to geographic diversity, you've also talked about the successful rollouts Oatly's had with partners like a Starbucks. But I'm curious what you see down the line in terms of product. Surely, they have to expand beyond their bread and butter right now. What kind of catalyst do you see in terms of additional product coming to line that could boost the stock even higher?
LAURENT GRANDET: Yeah. So what we say that, I mean, it's not the demand that is a limitation right now. It's really the supply. So we need them to-- and they are investing a lot, about 20%, in CapEx [INAUDIBLE] sales. So they need to open new plants in order to continue to [INAUDIBLE] consumer demands.
Just in those five countries, spending really primary milk and berry stuff, we think they will reach about $2 billion worth of sales in '23. And see them now on this, there is about a spread of $1 million upside [INAUDIBLE]. just on those five countries, meat and berry stuff.
And we see they can expand geographies. They can expand in different subcategories of plant-based and milk, like yogurt or ice cream. And that will, in addition to those $200 million we just mentioned, other than $900 million.
So, you know, we can have a very strong view on their future potential. And we are just talking here about expansion into some other categories or through more countries. They could go to [INAUDIBLE]. They could form countries in Asia. So again, the cost plan is really supply more than demand.
ZACK GUZMAN: All right. Laurent Grandet, Guggenheim Securities managing director and equity analyst. Appreciate you sharing your thoughts on Oatly. Obviously, an exciting one to watch. Down today, but we'll see what happens in the quarters to come. Appreciate it.