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Why Oatly Stock Plunged Today

By Joe Tenebruso – Nov 15, 2021 at 6:26PM

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Pandemic-related challenges are weighing on the oat milk leader's growth.

What happened

Shares of Oatly (OTLY -0.45%) fell 20.8% on Monday after the plant-based foods company cut its full-year sales forecast. 

So what

Oatly's revenue surged 49.2% year over year to $171.1 million in the third quarter. The provider of dairy alternatives was able to increase its produced finished goods volume by 77% to 131 million liters after boosting capacity at its facility in Vlissingen, Netherlands. Restaurant and retail store reopenings following the easing of coronavirus-related restrictions also contributed to the revenue gains. 

"The robust third-quarter revenue increase reflects broad-based growth across geographies and sales channels," CEO Toni Petersson said in a press release. "We're pleased with our ability to continue to be a leader in driving growth and sales velocity for the plant-based milk category within our key markets."

Wall Street, however, was expecting even stronger growth. Analysts had forecast revenue of nearly $186 million. 

A downwardly sloping stock chart.

Investors sold off Oatly's shares on Monday. Image source: Getty Images.

Moreover, higher production and shipping costs weighed on Oatly's profit margins. Its gross margin declined to 26.2%, down from 31.3% in the third quarter of 2020. Its net loss, in turn, expanded to $41.2 million, compared to a loss of $10.4 million in the year-ago quarter.

Now what 

Ongoing production and distribution challenges related to COVID-19 prompted Oatly to cut its full-year revenue outlook. Management now expects the company to generate revenue of more than $635 million, compared to its prior projection of $690 million.

Still, Petersson views these difficulties as transitory -- and he believes Oatly has long runways for growth still ahead.

"Despite these temporary headwinds, we are continuing to drive conversion from dairy to the plant-based milk category supporting our mission toward a more sustainable food system," Petersson said. "As we scale our global operations, we may experience certain variability in our strong growth rates quarter-to-quarter, yet our confidence in the category opportunity and long-term trends and trajectory of our business have never been stronger."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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