Why the A2 Milk (ASX:A2M) share price has this leading broker's Aussie clients scrambling

A2 Milk was among the most popular stocks of Saxo Capital Markets' clients last month.

| More on:
Two babies laying down together drink milk made with Bubs infant formula in bottles as the Bubs share price rises again today

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

A2 Milk Company Ltd (ASX: A2M) shares have emerged among the top 10 most popular traded stocks of Saxo Capital Markets' Australian clients in August.

What did Saxo say about the A2 Milk share price?

A2 Milk managed to slide into number 10 on Saxo's most popular stocks list, trailing behind household names such as Pilbara Minerals Ltd (ASX: PLS), Zip Co Ltd (ASX: Z1P) and Qantas Airways Ltd (ASX: QAN).

Saxo commented that:

The A2 Milk Company also made it in our list of the ten hottest stocks among our retail traders last month. The infant formula giant, which was once one of the favourites among the bulls, has lost its sparkle. The firm published its FY21 results towards the end of August, with revenue plunging over 30% to just AU$1.21bn.

Saxo analysts added:

Revenues fell most significantly throughout Australia and New Zealand, earnings 42% down year-on-year at AU$559.7m, which remains its biggest market. The stock's increasingly bearish sentiment was compounded by a 77.6% fall in EBITDA to just AU$123m.

Popular, but for the wrong reasons

A2 Milk experienced heightened levels of trading activity following the release of its FY21 results.

On 26 August, the A2 Milk share price plunged 11.8% to $6.05 with ~27.5 million shares changing hands.

The next day, it would fall another 2.64% to $5.89 with volume of ~15.7 million shares.

To add some perspective, its current 10-day average volume is approximately 8 million.

Looking at A2 Milk's volume profile, the company's shares might have landed on Saxo's top 10 list for the wrong reasons. Investors might have opted to sell their shares in August following yet another weak financial result.

What's next for A2 Milk?

A2 Milk's near-term outlook doesn't appear to be so bright according to its results commentary.

The company has observed that the Chinese infant nutrition market was "materially impacted by a lower birth rate, especially recently due to COVID-19 and related vaccination programmes causing many people to delay pregnancy".

Competition in the Chinese market has also been intensifying, with A2 Milk citing that "market share gains by domestic brands compared to international brands are expected to continue".

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia 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 Market News

Happy miner giving ok sign in front of a mine.
Opinions

Which ASX 200 stock offers 'material upside' amid continuing uncertainty over US tariffs?

Blackwattle Investment has identified one ASX 200 large-cap stock that is thriving on the uncertainty.

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 Bapcor, Boss Energy, Macquarie, and Novonix shares are falling today

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

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

2 rising ASX financial shares with 'meaningful upside' still left: fundie

Financials outperformed every other sector in FY25, but there are still buying opportunities left, say these experts.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Fortescue, Lynas, PEXA, and Regis Healthcare shares are charging higher

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

Read more »

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

A woman walks along the street holding an oversized box wrapped as a gift.
Broker Notes

Fundie reveals why these 3 ASX 200 large-cap shares ripped 35% to 96% in FY25

Blackwattle Investment Partners discusses the performance and outlook for 3 ASX 200 shares in its Large Cap Quality Fund.

Read more »

Five young people sit in a row having fun and interacting with their mobile phones.
Broker Notes

This fund manager just delivered a stellar year and he's bullish on these 5 stocks

With standout returns in both Australian and global equities, Andrew Mitchell shares five high-conviction stocks primed for long-term growth.

Read more »

A woman ponders over what to buy as she looks at the shelves of a supermarket.
Broker Notes

Does Macquarie prefer Woolworths or Coles shares today?

Which supermarket giant was recently named the favourite?

Read more »