The good run of the a2 Milk Company Ltd (Australia) (ASX: A2M) share price has come to an abrupt end today.
In late morning trade the dairy company's shares are down 3% to $5.97.
Why are its shares lower?
With no news out of the company today it appears as though today's decline is attributable to a broker note out of Deutsche Bank this morning.
According to the note, the broker has downgraded a2 Milk's shares to a hold rating.
Although Deutsche has increased the price target on its shares to NZ$7.00 (A$6.42), it doesn't see enough value in its shares at the current price to maintain its buy rating.
Incidentally, the broker has also taken this opportunity to downgrade a2 Milk's dairy processing partner SYNLAIT FPO NZX (ASX: SM1) to a sell rating.
Should you buy the dip?
I would agree with Deutsche that a2 Milk is a hold at the moment and would only consider starting an investment if its shares were at the $5.40 to $5.50 level.
I believe this provides a decent margin of safety for investors prepared to make a long-term buy and hold investment.
Until then I believe there are a number of great options elsewhere on the share market that offer a more compelling risk/reward.
