Shares of Oatly Group AB (OTLY) popped over 20% higher this week, according to data from S&P Global Market Intelligence. The oat milk brand posted Q1 earnings with more losses, but the numbers must have beat analyst expectations. As of Friday, May 3, shares of Oatly are off 96% from all-time highs after going public in the 2021 market frenzy.

Here's why Oatly stock was rising this week, and whether it matters for investors.

No growth, but fewer losses

In the first quarter of 2024, Oatly's revenue only grew by a few million dollars to $199 million. However, it was able to greatly improve its unit economics by getting its gross profit from $34 million last year to $54 million this year.

This improvement could have been a reason that Oatly's stock was rising this week. With the stock at around $1 a share and significantly off its highs, expectations were low for this struggling consumer goods brand.

Operating income improved from a loss of $72 million last year in Q1 to a loss of $28.4 million this year. While a big improvement, Oatly is still highly unprofitable and has never generated a profit over a 12-month period as a public company. The oat and plant milk categories are competitive, and it doesn't seem like Oatly has separated itself from the pack.

This is likely why Oatly's stock is now a penny stock and off 96% from its 2021 highs, even after this week's price pop. No revenue growth and consistent losses are not a good combination, no matter how cheap a stock looks.

Is the stock a buy now?

Seeing as it cannot generate a profit, Oatly stock is still a must-avoid for investors, even if the price looks cheap. It isn't growing revenue and is still burning a ton of cash.

Just take a look at its balance sheet. It has $200 million in cash, which gives it about a year of runway left before running out of money, based on its trailing-12-month numbers. It has over $300 million in convertible notes on the balance sheet, which will likely need to be paid back because they are below the stock conversion price.

Running out of money is not an improbable scenario for Oatly here. For this reason, along with the fact it cannot grow its revenue, investors should avoid buying this penny stock despite its recent earnings pop.