The Bellamy's Australia Ltd (ASX: BAL) share price has slumped again.
Falling a gut-wrenching 17% today and 19% yesterday, Bellamy's Australia shareholders will be asking when the pain will end.
Is Bellamy's a bargain?
Three months ago, when Bellamy's shares were riding high at more than $13, shareholders had a vision of Bellamy's infant formula lining the shelves of Chinese pantries.
However, following a profit downgrade, month-long voluntary trading suspension and shock changes to management, shareholders are falling over themselves for the exit – at around one-third the share price.
Usually, when a company's share price falls this hard, value investors and professional institutions lift their gaze to peer under the hood. Unfortunately, I think the chance of a near-term fix to the share price is low.
Bellamy's is likely facing pressures within its management ranks, has potential working capital issues, may be forced to complete a debt or equity capital raising, has supplier woes, and may even face a class action. But changing Chinese regulation could still be the game-changer (in a bad way).
With FONTERRA UNIT NZX (ASX: FSF) renegotiating its supplier agreement with provisions to protect against Bellamy's getting a takeover offer, the chance that a big buyer comes to the company's rescue is fading, in my opinion.
Foolish Takeaway
Following the profit downgrades and overall business shakeup, analysts have cut their fair value estimates for Bellamy's shares. For example, Ord Minnett and Morgans analysts have cut their price targets to $3.72 and $4.75, respectively, according to Dow Jones Newswires.
I think the difference in their value estimates serves only to highlight the uncertainty inherent within the company at this time. Indeed, I think it is too hard to tell if Bellamy's shares are a bargain, despite their enormous falls.
