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The analysts told investors that the oat milk company’s growth story has become “increasingly opaque.”
“Though we see a number of potential positives ahead, including (a) a cleaner strategy in Asia, (b) improving gross margins, (c) a tighter middle of the P&L, and (d) incremental distribution gains ahead in the US, we no longer feel comfortable recommending the stock given the level of uncertainty ahead,” analysts stated.
“To be clear, our downgrade is not directly related to the company’s decision to retrench in Asia, which seems like the right strategic move. But the fact that Asia fundamentals are much softer than expected is a blow to the growth thesis, one that should be reflected in the stock’s valuation.”
They reiterated that Asia should still be a longer-term growth driver for the company. However, JPMorgan believes it will take longer than expected for revenues to reach prior targets. As a result, their “confidence that Asia can ever expand as quickly as previously hoped has been impaired.”
“In a nutshell, without much visibility into where sales and EBITDA will go after 2023, we don’t feel comfortable recommending the stock,” analysts concluded.
