Why Oatly Stock Is Skyrocketing Today

Oatly (NASDAQ: OTLY) stock is seeing explosive gains in Thursday's trading. The oat-based beverage and snack specialist's share price was up 27.3% as of 3:30 p.m. ET and had been up as much as 33.3% earlier in the day's trading.

Oatly's huge valuation gains today come on the heels of big sell-offs for the stock yesterday. The big rebound in today's trading appears driven by positive media coverage, a recent filing with the Securities and Exchange Commission (SEC), and investors betting on upward volatility after yesterday's post-earnings sell-off.

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Oatly stock sees a dramatic valuation rebound today

Before the market opened yesterday, Oatly published its fourth-quarter results. Sales and earnings for the period came in below Wall Street's targets, helping to spur a dramatic sell-off for the stock. The beverage specialist's share price closed out the day down roughly 34%.

With the company's share price under $1 and its market cap sitting at roughly $293 million as of this writing, Oatly is in penny stock territory. Accordingly, the company can sometimes see huge movements on relatively little news.

Following yesterday's earnings report, TipRanks published an article titled "Oatly Reports Promising Financial Turnaround in 2024." The article outlined positive aspects of the company's Q4 performance and forward outlook.

Additionally, Oatly submitted a filing to the SEC stating that terms of the company's revolving credit facility agreement and term loan B credit agreement had been amended and that covenant levels governing minimum liquidity requirements and other terms had been adjusted. The changes were made in conjunction with the discontinuation of manufacturing operations at some facilities. Between some increased financial flexibility and a positive media write-up, investor activity today was enough to power big gains for Oatly stock.

What comes next for Oatly?

Oatly stock will likely continue to be highly volatile in the near term. With the stock trading below $1 per share and seeing relatively low trading volume most days, the company's valuation can see big moves depending on business news or shifts for the broader market. On the other hand, the company is scheduled to complete a 20-to-1 reverse stock split for its American depositary receipts on Feb. 18 -- so its shares should soon be trading well above the $1 mark and remain above the level needed to continue trading on the Nasdaq exchange.

Oatly expects sales to grow between 2% and 4% this year, and that 2025 will mark its first year of profitable growth. On the other hand, the revenue expansion rate isn't particularly encouraging -- and it remains to be seen how profitable the business can actually be. With the company closing out last quarter with $446.4 million in debt against cash and equivalents of $98.9 million, Oatly will have to continue delivering big margin improvements to pay down its debt unless sales growth reaccelerates.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.