Today witnessed a significant surge in Oatly Group's share price.
Oatly Group's shares saw a 15% surge on Tuesday, April 1, 2024, following their Q1 2024 financial results. Despite this, the stock remains a far cry from its all-time high, sitting at a staggering 96% below that mark. This slight boost in value was a welcomed relief for shareholders, nonetheless.
A monumental advance in gross profits
The headline-grabbing figure from the report was Oatly's impressive increase in gross margin. From 17% in the previous year and 11% in 2022, the company managed to boost its gross margin to a staggering 27% in Q1 2024. Management credited the uptick to improvements in their supply chain operations, with an unexpectedly lower price increase of less than 2%.
The graph below illustrates Oatly's return to its gross margin profile from when it first hit the stock market. Remember, it doesn't include the Q1 2024 results.
Enough progress, or just scratching the surface?
Oatly isn't projecting any firecracker revenue growth for 2024, with estimates of a mere 5% to 10%. While its improved gross margin is appealing, the company is still siphoning away cash at an alarming rate, losing $45 million in Q1 2024 alone.
Oatly has a tidy stash of $200.8 million in cash and equivalents as of Q1 2024, which should sustain it until the end of the year, pace and all. However, the company's growth rate is beginning to level off, and there's uncertainty about how much further efficiency gains the bottom line can capture.
Investors need to factor in their risk tolerance when considering Oatly shares, given that the stock remains a volatile proposition. But if management can continue finding ways to squeeze the company's finances cleaner, the stock could keep ascending.
Sources:1,2,3,4,5
Oatly's impressive financial improvements have attracted the attention of potential investors, with the improved gross margin of 27% in Q1 2024 being a significant draw. However, the company is still grappling with high operating costs, as evidenced by the $45 million loss in Q1 2024, which could be a concern for financially cautious investors.
As the company continues to focus on optimization and efficiency, smart investors might find opportunities in the volatile Oatly stock market, provided they have a high risk tolerance and believe in the potential of the company's financial strategy.
