What happened
Shares of Oatly (OTLY 3.01%) jumped last month as the alternative-dairy company reported solid first-quarter earnings and benefited from the market rally at the end of the month.
As a high-growth, high-priced stock, Oatly's movements tend to track with some other growth names that have gotten hit hard in recent months but surged at the end of May. According to data from S&P Global Market Intelligence, the stock finished the month up 16%.
Image source: Oatly.
As the chart below shows, the gains came in two major stages. First, the stock jumped on May 13 in apparent sympathy with an upswing in Beyond Meat (BYND 0.31%) after the alternative-meat company reported earnings earlier that week. Then, stocks rallied at the end of the month, helping to give Oatly a boost.
So what
Reporting first-quarter earnings on May 4, Oatly said revenue jumped 18.6% to $166.2 million, beating estimates of $161.1 million, as CEO Toni Petersson cited a "challenging operating environment" with the Covid lockdown in China and inflation increasing costs.
On the bottom line, its per-share loss widened from $0.07 to $0.15, which was better than estimates of a per-share loss of $0.12.
For the full year, the company reiterated its guidance for revenue to grow 37% to 43%, to $880 million-$920 million, indicating it expects to rebound from the slow first-quarter growth.
Oatly stock jumped 13% the day the report came out, but then plunged sharply as the broad market fell on the Federal Reserve's half-point interest rate hike.
On May 13, the stock spiked 21% as a post-earnings rally in Beyond Meat shares seemed to drive Oatly higher. Beyond Meat's earnings report was much worse than expected, but investors seemed to believe that plant-based stocks had gotten so cheap that they were now in value territory.
Oatly, then, rallied through the end of May in tandem with the S&P 500 as the broad-market index actually finished the month flat.
Now what
Though investors seem to have connected Beyond Meat and Oatly, they shouldn't be traded together. Oatly is a category-defining company in oat milk and oat-based products, while Beyond Meat faces stiff competition in the plant-based meat space.
Oatly is also outgrowing Beyond Meat and seems to have a more convincing path to profitability as it's targeting adjusted EBITDA margins of at least 20% over the long term. At a price-to-sales ratio under 3, Oatly's valuation looks reasonable now for its growth potential.
