Warning: The Oatley Penny Stock Surge.

Oakley stock is up 64 in the last five

days in this video we're going to talk

about whether or not it makes sense to

invest in Oatley stock a company that

manufactures oat milk do keep in mind

that while I'm a licensed financial

advisor this video is not personalized

Financial advice for you and even though

I run an ETF and I have a real estate

startup I'm all for providing

perspective but I'm not being paid by

you for your own personal financial

advice so any trades you make are on you

with that said remember that oddly is

part of one of nearly 600 companies that

ipo'd in 2022 or 2021 one in four of

those companies traded for less than two

dollars per share in December and

remember when you trade under a buck a

share for a while you risk getting

delisted and so Olay was knocking on

that door they fell all the way down to

a buck 28 from a high of 29 yikes but

now the Stock's up 15 on the day and

again it's up 64 in just the last five

days so what happened and who the heck

is this and what risks are there if you

were to invest in this company well

odley is a Swedish oat milk manufacturer

yes oat milk so there's Dairy which is

nearly a 300 billion dollar a year

industry then there's almond milk

which is like a 5 billion dollar a year

industry still pretty impressive then

there's oat milk which is like a 550

million dollar a year industry and then

there's only

which takes about a 28 share of that

market so you can see this is like

in terms of what they're producing right

oat milk you know boasts some cool

benefits low calcium sure it's a little

bit higher in carbs it's got more

unsaturated fats than fatty fats

compared to Dairy it's got some good B

vitamins in there although the B12 is

added so some people aren't super happy

about that because generally the B12 is

added in manufacturing since B12

typically comes from salmon tuna

sardines liver or shellfish milk eggs

and basically not oats right and some

argue that there could be a lot of sugar

but then again so could there be an

almond milk and if you're allergic to

almonds maybe you just need to have oat

milk if you actually want to be able to

have your Fruity Pebbles

which kind of defeats the purpose

potentially of being healthy but anyway

why is the stock rocketing and is there

a fundamental reason to believe that the

rocketing could continue well odley

announced that they're transferring

their leases and production capacity

from their two facilities or two of

their facilities in the United States

one in Ogden Utah and one in Fort Worth

Texas two a Canadian manufacturer called

Yaya Foods the goal is to fix their

screw-ups basically they have had a lot

of production shortages for their oat

milk product and they can't get their

act together when it comes to

manufacturing and don't take my word for

it you could look directly at their very

own reports and see that they tell you

exactly the same thing okay they have

challenges that they're facing at their

manufacturing facilities here's their

last earnings call they say it

themselves challenges at our facility

are impacting our margins and they don't

even have great margins because this is

a company that loses money but we'll

talk more about fundamentals in just a

moment it's just worth noting that

contract manufacturing Is Not Unusual

it's something that Nvidia does with

their chips it's something that Neo does

with their cards and apple does with

their iPhones and a lot of their

products so it's not unusual to design

something to package something and and

to basically do everything related to

the user experience but not be part of

manufacturing manufacturing is very hard

scaling manufacturing is very hard so

just because this company sucks at

manufacturing doesn't mean that oat milk

is a bad product or that Oatley is a Bad

Company it just means that you're

selling a niche product and now you're

giving up even more margin and that's

probably the biggest concern that I have

for the company because this is a

company that already doesn't have any

margin it's not a good situation in fact

all you have to do is Hop on over to

their financial statements here you'll

notice that on 183 million dollars of

sales they have costs of goods sold of

178 million which means they're gross

margin is less than three percent now

look last year things were a lot better

their cost of goods sold were only 126

million out of 171. that gives them a

gross profit margin of closer to 26

percent which that's reasonable you

could actually potentially make money

when you're at a 26 gross profit margin

they're nine months fared let's see here

they're nine months 527 fared a little

bit better at about a nine percent

profit margin but that's actually

concerning because it suggests that they

were at nine percent here 26 percent

here and when they get to the three

months so in other words the most recent

quarter they're basically at no margin

three percent so in other words things

are getting worse and not better and now

they've gotten so bad that they're

throwing in the towel completely and

going to contract manufacturing downside

with this is even though somebody else

might be able to come in and situate

this company and pay them about 70

million dollars for these rights margin

probably won't be as good as it ever

potentially could be if they did their

own manufacturing because guess what a

contract manufacturer wants to make

money and now maybe this works if you

have a very unique product like the

Apple iPhone which is a very high margin

product or a car like Neo or an Nvidia

chip which everybody wants to get their

hands on you know a new 4000 series

Nvidia chip right everybody wants their

hands on these it works maybe if you

have pricing power but I hate to say it

food is the last place I think companies

have pricing power consider for example

tattooed Chef in the plant-based Food

Market their prices have become so low

and their margin has become so low and

the stock has plummeted so low that they

have essentially left the exclusive

nature of plant-based Foods only and

moved into meat yes a plant-based food

manufacturer has moved into selling meat

because it's hard to have pricing power

at high margins in food when food is a

very very competitive industry and is

one where people's willingness to pay a

lot more money compared to other

available substitutes is very very low

consider that the dairy manufacturer

like the dairy industry is massively

subsidized in America like you already

might think milk is expensive it's

massively subsidized just to get it to

that level it's crazy now here are some

other fundamentals to look at

if this billion dollar company is a

company that you want to huddle for the

long term you have to be prepared

to consider their growth story

there isn't that much growth

for a niche product you would want to

see explosive growth even if you take

out foreign currency issues and

adjustments their company on average

across the world only grew revenues by

about 16.7 percent now that's great but

for a company that's still not positive

net income positive that's not too

exciting in fact not only are they not

net income positive but they're burning

if we jump over to their cash flow

statement they're they burned about

215 million dollars in the last nine

months hey if you want more of these

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course member live streams every day the

market is open the problem with that is

if you go to their balance sheet they've

only got 105 million dollars of cash

they've got current liability is that

when you consider cash in their

receivables basically get wiped out and

their inventory barely covers about a

quarter of loss maybe slightly more than

a quarter of loss depending on how you

look at it and what your projections are

but this is a company that needs money

so think about all the pieces of the

puzzle together here you have a company

that needs cash so they got a little

cash infusion by selling their

manufacturing right which gives up the

potential for higher margins in the

future

uh now maybe it'll work out again it

works out for companies like apple

Nvidia and Neo but they're selling a

high margin product and a product that a

lot of people want

oat milk is a niche product and it's

limited by your competitors prices like

dairy or almond milk which are

industries that are heavily subsidized

in America so in my opinion while there

might be a trading opportunity here I'm

not the biggest fan of being a

fundamental investor in the Swedish

company Oatley now I do not have any

short positions against this company and

I presently don't have any long

positions in this company at the time of

this recording I have no intentions of

opening any kind of positions and so

personally I just wanted to share this

perspective that I think this is a risky

company either way you slice it and I

personally would rather get some

financial statements in line to see hey

how is their contract manufacturing

relationship actually going to help lead

this company to profitability at this

point I'd probably rather be looking at

a small count like matterport than a

company like Oatley because at least

matterport I believe has at least some

degree of pricing power anyway thanks so

much for watching we'll see in the next

one bye