The a2 Milk (ASX:A2M) share price is down 50% in 6 months: Time to buy?

Is the A2 Milk Company Ltd (ASX:A2M) share price in the buy zone after falling almost 50% over the last six months. Here's what brokers think.

| More on:
falling asx share price represented by woman making sad face

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The A2 Milk Company Ltd (ASX: A2M) share price was well and truly out of form in February.

The infant formula and fresh milk company's shares lost 16% of their value. This compares to a 1% gain by the benchmark S&P/ASX 200 Index (ASX: XJO).

This latest decline means the a2 Milk share price is now down by almost 50% over the last six months.

Why is the a2 Milk share price sinking?

The a2 Milk share price has come under significant pressure in recent months due to a sudden and shocking deterioration in its performance.

This has been driven largely by COVID-19 pressures, though there are concerns that structural issues could now be impacting its performance.

In respect to COVID-19, after initially benefiting from stock piling at the height of the pandemic, a2 Milk has now seen demand fall off a cliff. This is particularly the case in the daigou channel.

With no international travel, Chinese daigou sellers are not coming to Australia and sending products back to the mainland for profit. This was a lucrative channel for a2 Milk and their absence is being felt.

Management isn't doing itself any favours either. Not only did a whole range of executives sell down their holdings before these impacts were understood by the market, but they have twice failed to accurately ascertain just how long the daigou recovery will take.

Both have weighed heavily on the a2 Milk share price.

Downgrading the downgraded guidance

Last month when a2 Milk released its half year results, it was forced to downgrade the (downgraded) guidance it provided just two months earlier. It commented:

"The pace of recovery in the daigou/reseller channel and in the CBEC channel has been slower than previously anticipated and the Company now expects revenue to be at the lower end of the previous guidance range."

"A lower EBITDA margin range is now expected due to lower revenue, higher brand investment, longer daigou/reseller support, movements in foreign currency and adverse channel mix relative to what was anticipated in December."

The company's new guidance implies an EBITDA range of NZ$336 million to NZ$364 million for FY 2021. This will be down 34% to 39% from FY 2020's EBITDA of NZ$549.7 million.

Where next for the a2 Milk share price?

Brokers appear largely divided on where the a2 Milk share price is going from here.

Analysts at Citi have a sell rating and expect it to fall a further 19% to $7.15. Whereas analysts at Morgans have an add rating and have tipped it to rise 17% to $10.40.

Macquarie is sitting on the fence with a neutral rating and $9.75 price target.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

Bored man sitting at his desk with his laptop.
Share Fallers

Why Catalyst Metals, Duratec, Nufarm, and Rio Tinto shares are dropping today

These shares are ending the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Dexus, Mayne Pharma, Nufarm, and Treasury Wine shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why James Hardie, Mayne Pharma, Nufarm, and Resimac shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Kogan, Monash IVF, OFX, and ResMed shares are falling today

Why are these shares taking a tumble today? Let's find out.

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Appen, DroneShield, Gentrack, and New Hope shares are dropping today

These shares are starting the week in the red. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Dexus, Dusk, Fletcher Building, and Paladin Energy shares are falling today

These shares are ending the week in the red. But why?

Read more »

Couple look at a bottle of wine while trying to decide what to buy.
Consumer Staples & Discretionary Shares

Treasury Wine shares: Buy, hold, or sell? Here's Macquarie's take

What is Macquarie forecasting for Treasury Wine shares amid the CEO’s unexpected exit?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Newmont, NRW, Peet, and Treasury Wine shares are dropping today

Let's find out why investors are selling down these shares on Thursday.

Read more »