Should you buy Oatly stock? 2-minute analysis

For more detailed analysis visit our website: https://www.overlookedalpha.com Oatly is a food company from Sweden that produces dairy products from oats. Oat milk is a fast growing trend but Oatly the company has struggled to meet demand for its products. In the third quarter of 2022, Oatly reported revenue of 183 million which was a 7% increase on the previous year. However, net losses more than doubled to 108 million. Even adjusted ebitda was negative at -83 million and net loss over the last 12 months is clocking -347 million . To top it off, gross profit margins dropped to just 2.7% in Q3 from 26% the year before. And Oatly lowered its full year revenue outlook from 800-830 million to just 700-720 million. That implies revenue growth of only 10% for 2022. Unsurprisingly, this news sent the stock down 16% overnight and shares are down 74% year to date. Trading at just over 2 bucks Oatly now has an enterprise value of 1.2 billion which means the company is worth roughly 1.7 times revenue. Oatly’s problems stem from its decision to build its own factories. Building these factories was costly and slow and allowed big rivals like Chobani, Planet Oat and Trader Joes to gain market share. On the Q3 call, management said it would start cost cutting measures, and shift to an asset-light model which will involve outsourcing more of production. This is a much needed move but it could be too late. Consumers now have a plethora of options to choose from when it comes to oat milk and there’s little reason why Oatly should be preferred over other brands. Plus, Oatly is going to need marketing dollars if it’s to win back market share. Low margin, consumer products businesses are notoriously risky investments and Oatly has got its work cut out. Morgan Stanley once gave this stock a $44 price target but this company continues to disappoint so I give it a bearish rating. But these are my personal opinions, not financial advice.