The Motley Fool

Should I buy Oatly shares after the IPO?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

3D Word IPO with Target on Chalkboard Background
Image source: Getty Images

Yesterday, Oatly (NASDAQ: OTLY) listed on the NASDAQ via an Initial Public Offering (IPO). It was a successful listing with Oatly’s share price closing at $20.20 – about 19% above the IPO price of $17.

Is Oatly a stock I should consider for my own portfolio? Let’s take a look at the investment case.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Oatly does what?

Oatly is a Swedish plant-based milk company. Founded in 1994, it’s the world’s original and largest oat milk business. Today, its products are sold in 60,000 shops and more than 32,000 coffee shops across 20 countries. 

At Oatly’s IPO price of $17 per share, the company had a valuation of around $10bn. However, after yesterday’s rise, the company is now valued at around $12bn.

Strong growth

There are several things to like about Oatly from an investment perspective. One is the company operates in a high-growth industry. Between now and 2027, the plant-based food market is forecast to grow at about 12% per year, driven by the growing vegan population and an increasing intolerance to animal protein. This industry growth should provide tailwinds for the company. It’s worth noting the company says its total addressable market (TAM) is $600bn.

Another thing that’s attractive about Oatly is its recent growth. According to its IPO prospectus, the company generated revenue of $421.4m in 2020, up 107% year-on-year. Revenue growth the year before was 73%. These figures suggest the company has momentum right now.


However, I do have some concerns about investing in Oatly stock. My first is the company isn’t yet profitable. Last year, it generated a loss of $60.4m, up from $35m the year before, on the back of investments in production, brand awareness, new markets, and product development.

The fact the company has been around for over 25 years and still isn’t making any money is a  concern, in my view. We’ve seen recently that the stocks of unprofitable companies can be crushed in a sell-off.

Secondly, I expect competition in this space to be intense in the years ahead. Already, there are a number of oat milk products on the market. Brands operating in this space include Alpro, Califia Farms, Innocent, Rude Health, and Quaker. Oatly tends to get good reviews but there are certainly other good products.

Consumer goods giants such as Unilever and Nestle could pose a threat too as they’re now moving into the plant-based food arena. Is Oatly’s brand powerful enough to protect its market share? I’m not so sure at this stage.

Finally, there’s the valuation. As mentioned, Oatly has a market-cap of about $12bn. This means its trailing price-to-sales (P/S) ratio is about 28. If sales were to double this year, its forward-looking P/S ratio would be about 14.

These valuations seem high, to my mind. It’s worth noting that Beyond Meat generated roughly the same level of sales as Oatly last year but has a market-cap of $6.8bn – about 40% lower. CNBC’s Jim Cramer described Oatly’s valuation as “ridiculous” yesterday.

Oatly stock: my move now

Weighing everything up, I won’t be investing in Oatly for now. I think the risks outweigh the potential rewards. In my view, there are better stocks I could buy.

Like this one...

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Edward Sheldon owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Beyond Meat, Inc. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.