Vegan milk company Oatly sees share price drop 15% in 5 days despite 50% revenue gain

The Oatly share price dropped 2.6% yesterday on Wall Street to take losses over five days to almost 15% for the vegan milk company. The Swedish brand, the world’s largest oat milk produced, listed on New York’s Nasdaq exchange 3 months ago and has had a rocky start to public life, losing over 26% of its market capitalisation since.

Yesterday’s losses came despite the fact the company had just announced revenues over the most recent quarter up by over 50% on the same period a year earlier. Stock market analysts have been raising their expectations for annual sales as a result of the boom in consumer demand.

Oatly itself has called 2021 a “transformative year” and said it has been hard pushed to keep up with the increased interest in its products as revenues gained 53.3% to $146.2 million over the quarter to June 30. However, while sales popped net losses also shot up from $4.8 million to $59.1 million, surprising investors.

The company said costs related to its recent IPO, compensation costs and investment in growth were behind the spiralling deficit. On the bright side, Oatly forecasts annual revenues that are now expected come in at over $690 million. That would represent growth of over 64% on numbers generated in 2020.

Yesterday’s share price slide to $16.43 sees the company’s stock trading at 57 cents less than the $17 they were sold for during the May IPO that valued the company at $10 billion. Its current market capitalisation is $9.73 billion.

Founded in Malmo, Sweden, in 1994, Oatly converts oats into fibre-rich vegan alternatives to milk, yoghurt and ice-cream products now sold across 20 international markets and through supermarkets, restaurants and cafes. In an effort to keep up with demand a new production plant has opened in Ogden, Utah, and the company’s Netherlands plant is having its capacity doubled.

Chief executive Toni Petersson comments:

“Our new and existing production capacity gives us confidence in our ability to achieve an accelerated revenue growth rate in the second half of this year.”

Oatly’s stated ambition is to dominate the vegan milk alternatives market but faces plenty of competition from rivals despite having built a strong brand over recent years. It has been targeted by short-sellers since going public at a $10 billion valuation questioned in some quarters.

The company’s efforts to protect and promote its brand recently suffered a setback in the UK where it lost a case it had brought against local business Glebe Farm. The British family company had launched a gluten-free drink named Pure Oaty which Oatly claimed took unfair advantage of its trademarks. The judge ruled against the Swedes, arguing he saw little risk that shoppers would confuse the British brand with Oatly’s.