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

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Beetaloo, Botanix, Cobram Estate, and Origin Energy shares are falling today

These shares are having a poor session on Tuesday. But why?

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »