Daily Brief: Oatly Hits The Stock Market, Investors Lap The Opportunity Up

Daily Brief: Oatly Hits The Stock Market, Investors Lap The Opportunity Up

almost 3 years ago3 mins

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Oatly floated on the US stock market on Thursday, and investors gave the plant-based milk maker a warm welcome: its share price immediately frothed up 30%.

What does this mean?

It’s no surprise Oatly’s newly public stock was in such high demand. Consumers’ environmental and nutritional concerns have pushed plant-based products into the mainstream, and investors have long been looking for ways to back the companies fueling the category’s rise.

Oat in front

Their enthusiasm allowed Oatly to price its initial public offering (IPO) at the top end of its intended range, raising more than $1.4 billion in the process. The company plans to spend part of the proceeds on paying back a sustainability-linked loan, with the rest funding its ongoing expansion in the particularly fast-growing oat milk market – as well as the development of new products like plant-based cheese.

Room to grow

Why should I care?

For markets: Competition? What competition?

The IPO valued Oatly overall at $10 billion – a tidy step up from $2 billion just ten months ago. That valuation amounts to 24x last year’s sales, compared to Beyond Meat’s 16x and Danone’s relatively paltry 2x (which might be because its two plant-based milk brands – Alpro and Silk – are just small cogs in a much bigger dairy machine). But even as new competition keeps coming onto the scene, Oatly’s ubiquitous brand means its growth is – at least for now – continuing to outstrip its rivals’.

Oatly growth

The bigger picture: There’s even more room for plant-based milk to grow.

Oatly’s successful IPO came the day after website-hosting service Squarespace’s shares fell 13% on their own market debut. The difference might in part be down to a precedent set by Beyond Meat: the company’s stock price has risen more than 300% in the two years since it went public, despite a few ups and downs along the way. Investors, then, may well expect Oatly to be to plant-based dairy what Beyond Meat’s been to plant-based meat.

Keep reading for our next story...

Kohl’s Posted Expectation-Busting Earnings As Demand For Apparel Surges

Kohls image

Kohl’s posted quarterly earnings that beat analysts’ expectations on Thursday – though that’s not too hard to do when your chain of department stores has been… well, closed.

What does this mean?

Kohl’s sales were a whole lot better than expected, climbing 70% compared to the same time last year. And that seems to have left the company feeling pleased with itself: it upped its sales expectations for the rest of the year too.

Still, “better than expected” is a relative statement, and the bar wasn’t exactly high: Kohl’s stores were shuttered this time last year, which meant its sales were down 40% compared to 2019. What’s more, last quarter’s sales were still lower than they were in the first quarter of 2019, before the pandemic ever darkened our doors. And that – alongside investors’ concerns that demand will vanish when stimulus checks run out – might be why its shares initially fell 6%.

Kohls stock
Source: Google Finance

Why should I care?

For markets: This time, it’s personal (spending).

Kohl’s isn’t the only US retailer to nod to surging demand this week: Walmart, Macy’s, and Target all reported strong earnings this week, thanks to what some economists are dubbing “revenge spending”. Those economists noticed it first in China as early as April last year, and they’ve suggested watching the country’s developments closely to get a better sense of what’s to come elsewhere.

Department store blues
Source: The Wall Street Journal

The bigger picture: Activists get their way, for better or worse.

If the pandemic weren’t scary enough, Kohl’s has also had to stave off dreaded activist investors – major shareholders that try to effect change in hopes of boosting a firm’s share price. They were criticizing Kohl’s for its long history of lackluster sales, until the company finally gave in last month and agreed to expand both its board of directors and its share buyback plan. So far, though, it has nothing to show for it, with its shares having underperformed department store rivals Macy’s and Nordstrom ever since.

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