Oatly’s Debt Dilemma: Can the Plant-Based Pioneer Regain Its Financial Footing?

As December begins, Oatly Group AB faces a critical financial challenge. The company is grappling with a substantial debt load that threatens to overwhelm its equity base. This stark reality persists even as some Wall Street analysts maintain bullish recommendations, creating a pivotal question for investors: does Oatly have the time and strategy needed to repair its balance sheet?

A Balance Sheet Under Siege

The core issue is illuminated by the company’s third-quarter financial statements. While Oatly reported quarterly revenue growth to $222.8 million, this positive signal was overshadowed by deeper problems. The company posted a significant loss per share of -$2.15.

More concerning is the state of the balance sheet. Total debt stands at $507.7 million, juxtaposed against a shareholder equity that has dwindled to a mere $18.7 million. This creates an extreme debt-to-equity ratio of approximately 27.2, indicating a highly leveraged and vulnerable financial position.

Analyst Optimism Contrasts with Fundamentals

Despite these daunting figures, two investment firms recently reaffirmed their confidence. Mizuho Securities maintained a price target of $18.00, while DA Davidson set its target at $14.00. Both firms continue to recommend purchasing the shares. This optimistic stance presents a sharp divergence from the underlying financial metrics, placing the stock in a curious position. Trading around $12.00, it sits below these analyst targets, suggesting theoretical upside, yet the fundamental risks are substantial.

Should investors sell immediately? Or is it worth buying Oatly?

Sector Headwinds and Glimmers of Hope

Oatly’s struggles are not occurring in a vacuum. The broader plant-based food sector is facing pressure, as highlighted by a recent $38.9 million legal judgment against competitor Beyond Meat. Such industry-wide setbacks underscore the market’s competitive and litigious nature.

Nevertheless, Oatly’s operational performance shows some resilience. The company’s revenue growth outpaces many peers, and its gross margin is approaching 30%. These are indications that internal cost-saving and efficiency initiatives are beginning to yield results.

The Path Forward and the 2026 Crucible

The company’s ability to navigate its debt burden will be the defining narrative for the foreseeable future. Risk-averse investors are likely to remain on the sidelines until Oatly can chart a clear and convincing path back to sustainable positive cash flow and a strengthened equity base.

All eyes are now on the full-year 2025 results, scheduled for release in February 2026. Until that definitive report card arrives, the stock’s trajectory will likely be influenced by broader market sentiment. The clock is ticking for Oatly to demonstrate that its growth story can ultimately conquer its balance sheet woes.