Short Selling

Oatly Stock: Short Sellers See Further Downside

OATLY GROUP AB
(OTLY:US)
12 months:
-79.13%
Activity:
Bullish
Pattern:
Rising short interest
News:
Q1 results
OATLY GROUP AB
(OTLY:US)
12 months:
-79.13%
Activity:
Bullish
Pattern:
Rising short interest
News:
Q1 results

Short selling data is always worth keeping an eye on. If the short sellers are targeting a stock, there’s usually a very good reason they are doing so.

In this report, we are going to look at the short interest data on Oatly AB (OTLY:US). Oatly is a Swedish company that manufactures oat milk. The world’s largest oat milk business, it went public in 2021 via an Initial Public Offering (IPO). The company is listed on the Nasdaq and currently has a market cap of $2.4 billion.

Oatly: Short Interest Data

We have covered Oatly before. Last July, we noted that the stock was receiving considerable attention from the short sellers. At the time, around 7.4 million shares were on loan, representing about 11.5% of the free float. Since that article, Oatly’s share price has declined from around $18 to $3.60. So, the short sellers will have done very well here.

What’s interesting, however, is that the short sellers haven’t backed off after the recent share price fall. Instead, they have increased their short positions. Looking at the current short interest data, we can see that at present 25.10 million Oatly shares are on loan (approx. 30.29% of the free float). That represents a 242% increase in the number of shares on loan since our last article. This is concerning, in our view. It tells us that the short sellers expect Oatly stock to fall further.

Why Short Sellers Expect Oatly Stock to Fall

As for why the short sellers expect the stock to fall from here, it could be down to the company’s lack of profitability. In the first quarter of 2022, the group posted a net loss of $87.5 million, or 15 cents per share, compared to a loss of $32.4 million, or seven cents per share, in the same period a year earlier. Analysts had been expecting 12 cents per share. Gross profit margin was very low at just 9.5%. A year earlier, it was 29.9%. For the year, Wall Street expects the group to generate a net loss of $282 million. It’s worth pointing out here that in a scathing report last year, short seller Spruce Point Capital Management said that Oatly will never be profitable.

It could also be down to the fact that the company is going to need a fresh injection of capital in the near future. This year, it plans to make capital expenditures of $400 million to $500 million. In the current economic environment, capital is not easy to obtain.

Whatever it is the short sellers are looking at here, we think caution is warranted towards the stock. The high level of short interest indicates that the short sellers expect the stock to fall further.

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