Why Oatly Stocks Fell This Week

Shares Oatly Group (OTLY 1.16%)The maker of oat-based foods and beverages fell this week after the company posted middling results and a rally from the previous week leading up to its earnings report faded.

As of 3:18 p.m. ET on Friday, the stock was down 17.9% for the week, according to data from S&P Global Market Intelligence.

Image source: Oatly.

Oatly still has to prove itself

Oatly shares fell sharply in the first two trading days of the week despite no news about the stock. Investors seemed to believe that the company, best known for its oat milk, was overbought ahead of its second-quarter earnings report.

That momentum proved to be accurate as the company’s shares also sold off on Wednesday following its earnings report, even though headline numbers beat estimates.

Revenue for the quarter rose 3.2% to $202.2 million, beating estimates of $201.1 million, showing the company stabilizing previous revenue declines. Its business outside of China also showed stronger growth, with North America up 10%.

Oatly’s recent efforts to reduce costs and scale its business are paying off: gross margin increased 10 percentage points to 29.2% and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $11 million, significantly better than the loss of $41.5 million in the year-ago quarter.

Ultimately, the company reported a loss of $0.05 per share, which was better than the consensus estimate of a loss of $0.07.

CEO Jean-Christophe Flatin said: “In the second quarter, we increased volumes in every segment, continued to structurally reduce our cost structure and continued to invest to further strengthen our brand.”

Can Oatly come back?

Oatly has made many improvements over the past year, but it remains unprofitable and has seen little revenue growth.

Oatly appears to be a category leader, but it’s unclear whether there’s significant growth potential there, as the hype around oat milk has waned after its initial boom. At this point, the stock seems fairly valued, at least until revenue growth accelerates.