A2 Milk share price sinks to multi-year low following broker downgrade

This broker is no longer bullish on the struggling infant formula company…

| More on:
ASX shares downgrade A young woman with tattoos puts both thumbs down and scrunches her face with the bad news.

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

Key points

  • A2 Milk shares have hit a multi-year low on Monday
  • This morning a formerly bullish broker downgraded the struggling infant formula company's shares
  • Its analysts believe industry data is pointing to some tough times ahead

The A2 Milk Company Ltd (ASX: A2M) share price is sinking on Monday afternoon.

At the time of writing, the struggling infant formula company's shares are down 5% to a multi-year low of $3.99.

This means the A2 Milk share price is now down almost 30% in 2022.

Why is the A2 Milk share price sinking?

While the market is dropping on Monday, the A2 Milk share price is falling more than most after being the subject of a bearish broker note.

According to a note out of Bell Potter, its analysts have downgraded the company's shares to hold rating and slashed the price target on them by 33.5% from $7.15 to $4.75.

While this still implies reasonable upside from where its shares trade today, it isn't enough for a more positive rating from the broker. Particularly given recent industry trends, which Bell Potter believes warrant a more cautious view on the company.

What did the broker say?

Bell Potter revealed that its industry checks paint a worrying picture for A2 Milk, based on historical patterns.

The broker explained:

In recent months there has been an emerging dislocation between volumes entering Australia from NZ and volumes exiting Australia to China in shipment data we monitor. While this dislocation may prove transitory in nature (i.e. lockdown linked), historically this pattern has not been supportive of strong volume growth. The data dislocation warrants a more cautious view on the stock and with our revised FY22-24e NPAT forecasts sitting below consensus, we downgrade our rating from Buy to Hold.

Bell Potter is now expecting profits of NZ$108.6 million in FY 2022, NZ$118.5 million in FY 2023, and NZ$136.2 million in FY 2024.

While heading in the right direction, this is still materially lower than both FY 2019's profit of NZ$287.7 million and FY 2020's profit of NZ$388.1 million.

Should you invest $1,000 in The A2 Milk Company Limited right now?

Before you buy The A2 Milk Company Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and The A2 Milk Company Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

Motley Fool contributor James Mickleboro 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 Scott Phillips.

More on Broker Notes

Smiling man working on his laptop.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Time to sell written on a clock.
Broker Notes

6 ASX 200 shares that experts say it's time to sell

Brokers say it's time to bail out of these ASX 200 stocks.

Read more »

Happy business woman with her co-workers.
Broker Notes

5 ASX 200 shares just upgraded to 'strong buy' ratings

Brokers say these 5 stocks will rise in value over the next 12 months.

Read more »

a woman holds a facebook like thumbs up sign high above her head. She has a very happy smile on her face.
Broker Notes

Macquarie says these top ASX 200 shares could rise 10% to 30%

Here's why the broker is urging investors to buy these shares.

Read more »

Middle age caucasian man smiling confident drinking coffee at home.
Broker Notes

Should I buy or sell Westpac shares in April?

A leading broker has given its verdict on Australia's oldest bank. Here's what it is saying.

Read more »

Two brokers analysing stocks.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

A pilot stands in an empty passenger cabin smiling with his arms crossed looking excited
Broker Notes

Why Qantas shares could be a top buy in April

What are analysts saying about the Flying Kangaroo?

Read more »

A young man sits at his desk working on his laptop with a big smile on his face due to his ASX shares going up and in particular the Computershare share price
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »