Why is Oatly Stock Down Today

Why is Oatly Stock Down Today?

Oatly sees shares take a tumble following reductions to its sales outlook for the year, but is it time for investors to start worrying?

Oat-milk manufacturer Oatly (NASDAQ: OTLY) saw its share price plummet yesterday following the company issuing warnings about production challenges currently being faced. Global supply chain issues have caused trouble for the dairy alternative company, with both production and distribution expected to take a hit.

The business stated that it was “investigating a quality issue” that could lead to some products being taken off shelves in Europe coming into the holiday season. It also cited sales growth that is “slower than we anticipated” across Europe and the Middle East as another reason for the revised growth forecast for the year.

What does this mean for investors?

Since achieving a valuation of $10 billion following a successful IPO in May, Oatly has seen its stock price tumble by almost 60%. Pandemic restrictions have curtailed its growth opportunities tremendously, but these issues only serve to underline a litany of other problems faced by the company.

Steadily rising manufacturing costs, labor shortages, and increased demand as the world begins to reopen have all left the firm struggling to keep up with supply of its products. Chief Operating Officer Peter Bergh outlined that “production capacity has been a major constraint on our growth” in a call on Monday.

With calls for food products rooted in conservationism growing larger and larger, companies like Oatly have struggled to meet the demand. Beyond Meat, a manufacturer of plant-based alternatives to meat, echoed this sentiment last week when it blamed continued supply-chain disruptions for its poor Q4 outlook.

So should I invest in Oatly stock?

The news out of Oatly isn’t all bad. While the company may be struggling to meet the sheer demand for its products, being in demand is most certainly still a good thing. The firm produced 131 million liters of oat milk this year up to Q3, a 77% increase on the same period last year. Sales also rose by nearly 50% last quarter to a respectable $171 million. While losses continue to widen, the company has spent extensively on marketing in order to solidify its brand and respective market share.

Lower sales outlooks for the year are indeed worrying, but investors should need no reminding of just how impactful the global pandemic was on many industries. As we transition back into some semblance of normality, the issues plaguing companies such as Oatly should hopefully begin to subside. Oatly still retains some strong underlying factors and certainly has the potential for growth if it can resolve its current issues. Investors should keep a close eye on how the company responds entering the early parts of 2022. Any upturn in fortunes could signal a potential time to invest.

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