Will Oatly actually survive these 3 key challenges?

After losing 90% of the share value from its peak, Oatly is down but not out.

A “successful” IPO that trapped investors

Having spent nearly a decade rebranding itself as a planet-friendly drink “made for humans”, Oatly’s Initial Public Offering on NASDAQ in May 2021 was a big success. Priced at $17 a share, Oatly raised $1.4 billion at a whopping valuation of $10 billion from the IPO. Oatly shares (stock ticker “OTLY”) jumped 30% to $22.12 on its opening trade and reached $29 in mid-June.

Photo by Madalyn Cox on Unsplash

However, Oatly’s valuation was very expensive from the get-go and relied on investors’ huge confidence in its future success. Oatly’s Price-to-Sales ratio at the IPO was over 20x, when US consumer staples stocks typically trade around 1x - 1.5x. This meant that Oatly was 15 times more expensive than its broader peers, which at the time was justified by Oatly’s rapid growth rate.

Unfortunately, the bet on Oatly’s publicly traded stocks has so far been catastrophic for their investors. From the 2021 peak, Oatly’s share value dropped by over 90% to around $2.5 today - and that’s after a recent rebound from the partnership news with Ya YA Foods (more details below).

OTLY Stock Chart, click here for the full chart

Oatly faced three key challenges in the last quarter

Oatly faced three main challenges in the last quarter, and consumer demand was not one of them:

1. Technical issues inside the Ogden facility that constrained the product supply

2. Inflation and COVID restrictions in China

3. FX headwinds resulting in a ~10% lower reported revenue

Now the million-dollar question is, can Oatly overcome these issues and recover? Let’s go for a deep dive.

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