I love Oatly brand. I like the milk and the ice cream is delicious. This product appeals to people who cannot drink milk and to plant based food believers. Plant based food is a growing market, and growth is everything, when it comes to stocks. This is a manufacturing company with a unique product in the crowded non-dairy market.
Anyone who can make ice cream taste this good, without milk, is onto something. I found out about this product because my family put it in the cart. I tried it. Then we had sharp words about who ate the last of it. That did it! So I headed over to the computer to get a feel for the personality of this company and to look at the financials.
Oatly’s background is established through the website and its Investor Relations page. Oatly is a Swedish company, started in the 1980s in Lund, Sweden. About this time, lactose intolerance was being scientifically verified as a chronic condition; thus a market for non milk beverages developed. Oatly undertook the effort to find a way to make oats into a liquid beverage and through the use of enzymes, was eventually successful, leading to the creation of the first oat drink that could be marketed worldwide. Snap! Who knew Science could taste this good!
They only do oats; no soy and no almonds, just oats. Oatley has five product categories: milk, ice cream, yogurt, cooking creams, and spreads. The yogurts are yummy and are a refreshing change from cow and goat milk. Soy and almond milk have been the big kids in the alt milk aisle for a long time. Introducing oats to the market makes Oatly the new, popular, kid in school. Everybody loves a new kid! Oats are good for heart, I’m told. It is always the product. Nothing can replace the product. Slick marketing results only lasts as long as the commercials run.
The BBC reported that some big celebrities got behind the IPO for this company. But that always makes me nervous about the stock price being run up by the media power. I don’t like a lot of publicity on a company because that can drive the IPO up very high, only to have a hard crash after the opening and stock restrictions expire.
According to the SEC F-1 filing, Oatly’s IPO price was estimated between $15.00 and $17.00 per share and landed at $17.00 for 84.4 million shares American Depositary Shares (ADS), at $17.00 per share. As of June 8, 2021, roughly a month after the IPO, Oatly (OTLY) was trading around $10.00 per share higher, at $26.99. Gotta like that. But! there is a short seller on the horizon who is driving the price down, claiming that Oatly did not properly report revenue and its practices are not climate friendly. All we can do is to see how this dramatic turn of events plays out. Roughly two months later, on August 13, 2021, the stock was trading at $16.87. So, it is a waiting game. Me, I’m still eating that Strawberry ice cream.
Income Statement and Balance Sheet
There are not a lot of financial statements because Oatley’s Initial Public Offering was so recent — in May 2021. So, my research is from SEC’s F-1 statement. I did get two years of financials from the SEC – for 2019 and 2020 –and I like what I am seeing so far. In 2019, after the cost of goods sold, income was $66.5 million. In 2020, after the costs of goods sold, income almost doubled, to $129.2m. Rising income is a crucial feature of stock analysis. Oatley also has a good balance sheet, with assets for 2020 listed at $678.9m and liabilities of almost half that amount at $352.8m. So far, so good.
Now, cash flow shows net cash from financing almost three times more in 2020 than in 2019. Also, Oatly had a loss for in 2020 of $60.3m. In my mind, it is not clear from the SEC filing why there was a loss. This is something to ferret out if possible. So, this great company is a hold until more information comes out about the 60 million loss and the moves by the short seller.
Oatly is not a U.S. corporation, so the only way you can buy this stock is through American depository (ADS) shares. You need a broker to get a block of these shares. It looks like the fee is $5.00 per 100 shares. This stock is a hold and a buy if the source of the cash loss in 2020 becomes more clear.
The author does not yet have stock in Oatly (OTLY). Try that ice cream though; incredibly good. Feels like Summer to me, even if it’s late fall. Just sayin’.
*This article is based on the opinion of the author and does not guarantee the accuracy of the data and shall not constitute a basis of liability for any loss.
