Are we in the midst of a vegan milk boom? That’s the billion-dollar question for investors of Swedish plant-based milk company Oatly (NASDAQ:OTLY). They’re counting on a surge of interest in this niche product and hoping to see some price improvement in OTLY stock.
Based in Malmö, Sweden, Oatly’s backers include celebrities like Oprah Winfrey and Jay Z. The company was founded in the 1990s and is now riding a recent wave of interest in healthy, plant-based foods.
I can easily see the bull thesis here: millennials and Generation Z consumers seem to have a preference for sustainable, vegan-friendly foods.
But then, Oatly’s investors aren’t enjoying massive gains yet. Hopefully, we’ll be able to uncover some data that points to a brighter future for this intriguing oat-milk purveyor.
A Closer Look at OTLY Stock
Even though Oatly’s been in the vegan-milk game for a long time, OTLY stock is quite new.
Oatly priced its initial public offering at $17 per share on May 19. That’s at the high end of the previously indicated range of $15 to $17.
Then, on May 21, OTLY stock began trading on the Nasdaq Exchange. The buyers immediately pushed the stock above the IPO price, as it opened at $22.12.
The share price continued to move upwards for a while, topping out at $29 in mid-June. Unfortunately, it was all downhill from there.
I hesitate to say that Oatly is a poster child of IPO mania, but folks who bought into the hype definitely got punished.
By Aug. 20, OTLY stock had fallen all the way down to $15.63. It’s now back to nearly $18, but still hasn’t shown sustained gains from its IPO. Now investors have to decide whether to hang on, or cut and run.
Meanwhile, prospective investors may choose to view this situation as a buying opportunity, or as a signal to avoid the stock altogether.
To help us make a more informed decision, let’s see what the most recently reported financial data says about Oatly.
Fiscal Misses, But Just Barely
Sometimes, investors can forgive a company when it just slightly misses earnings estimates.
Can we forgive Oatly for this? I’ll give you the data now and let you decide.
Let’s start with the top line. For the second quarter of 2021, analysts polled by FactSet projected that Oatly would report $147 million in revenues.
As it turned out, the company reported revenues of $146.2 million, which missed the mark but just barely.
Next, we’ll examine the bottom-line results. The analyst community modeled a net loss of 10 cents per share for Oatly during the second quarter.
The actual result was a net loss of 11 cents per share. Again, Oatly was just shy of Wall Street’s expectations, but it wasn’t a horrendous miss.
Indeed, Oatly CEO Toni Petersson parlayed these almost-in-line results into a bragging opportunity.
The quarterly revenues reflected “broad-based growth across geographies and sales channels despite certain COVID-19 and startup-related manufacturing headwinds,” Petersson declared.
Ramping Up Expectations
Even though Oatly didn’t post top- and bottom-line beats, both the company and the analysts envision a solid year.
Ambitiously, Oatly expects its revenues to increase more than 64% to over $690 million for the full fiscal year.
Wall Street is only slightly less optimistic, predicting fiscal-year revenues of $682 million.
To help Oatly achieve its lofty financial objective, the company plans to increase its production capacity by 50% at its Utah manufacturing facility.
This isn’t the company’s only expansion effort. Reportedly, Oatly’s Singapore plant started production in early July.
On top of that, the company claimed that its Maanshan plant in China is on track for launch in 2021’s second half.
The Bottom Line
There’s no denying it: OTLY stock, like oat milk itself, isn’t to everyone’s taste.
It’s a niche investment that involves risk. Do you have faith in the company’s and Wall Street’s optimistic full-year projections?
If the answer is yes – and if you envision a strong future for the non-dairy milk market as a whole – then you should be able to find a place for OTLY stock in your portfolio.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
