Last week, Swedish-based oat milk specialist Oatly (NASDAQ:OTLY) launched on the NASDAQ via an initial public offering (IPO). I want to know if the current Oatly share price is tempting enough for me to add it to my portfolio.
Oat milk popularity is soaring
I didn’t know too much about oat milk prior to researching Oatly and looking deeper into the current Oatly share price. I did know there has been surging demand for plant-based and more environmentally friendly manufactured food products. There is a big impetus on saving the planet and oat milk is said to be better for the environment as it needs substantially less land to grow oats and overall produces less CO2 than cow’s milk. Furthermore, some people need alternatives to cow’s milk for health reasons.
The Oatly brand is available in more than 20 countries throughout Europe and Asia. Its popularity has been boosted by celebrity endorsements from well-known figures such as Oprah Winfrey, Jay-Z, and Natalie Portman to name a few. These types of endorsements can help massively. These people have huge platforms and also don’t risk their reputations lightly. Oatly also has commercial partnerships with Starbucks and Alibaba.
Oatly share price and recent performance
Oatly listed at $17 a share and a huge market cap of $10bn. The day it listed saw its share price climb to above $22, but as I write it is currently trading for just over $21.
I believe it’s fair to call Oatly a market leader in the oat milk product category as it has the best-selling products in the alternative dairy segment of key markets such as Sweden, the US, the UK, and Germany.
Oatly earned 63%, 24%, and 13% of its FY2020 revenue from its EMEA (Europe, the Middle East, and Africa), Americas, and Asia segments respectively. It clearly has a global footprint and is growing. In fact, Wall Street analysts predict Oatly will grow even faster than the overall global oat milk and dairy market. Analysts predict revenue growth will be more than 50% in FY2021 and more than 43% in FY2022. This will definitely boost the Oatly share price if these forecasts come true. Of course, forecasts can change based on future developments.
Positives, risks, and my verdict
Currently, Oatly stands to make a hefty sum from the proceeds of its IPO. It intends to expand production facilities. I like the sound of this as it could contribute to future growth. Also, it is already an established global company making progress in several territories with ambitions of further growth. In addition, analysts are predicting excellent revenue growth in the coming years. Finally, it has some excellent commercial partnerships and some potentially fruitful endorsements.
Oatly may be the type of product that is essentially a fad. It may not be popular or the ‘in thing’ in a few years time. Next, Oatly is still unprofitable despite being established for over two decades. Linked to that, I feel the opening Oatly share price and its market cap are very high.
I would not buy Oatly shares for my portfolio just now. I would much rather invest in profit-making companies that have defensive qualities for the long term. However, I will keep a keen eye on developments.
