How does the A2 Milk (ASX:A2M) share price compare to the ASX 200 today?

You know it’s been a tough day on the market when shares in embattled A2 Milk outperform the broader index.
The post How does the A2 Milk (ASX:A2M) share price compare to the ASX 200 today? appeared first on The Motley Fool Australia. –

You know it’s been a tough day on the market when shares in A2 Milk Company Ltd (ASX: A2M) are outperforming the broader index.

At market close, shares in the infant formula producer finished the day down 1.6% trading at $5.45 apiece.

In comparison, the S&P/ASX 200 Index (ASX: XJO) has tanked 1.9% in today’s session.

Although the A2 Milk share price is beating the ASX 200 today, it has underperformed the index over the past year.

Let’s take a look.

Why is the A2 Milk share price underperforming in 2021?

The A2 milk share price has tanked more than 50% since the start of the year. By comparison, the ASX 200 has climbed more than 10% higher since the start of 2021.

In the last year, shares in A2 Milk have had a spectacular fall from grace.

The one-time market darling has faced unprecedented challenges and uncertainty as a result of the COVID-19 pandemic.

The closure of international borders has crippled the infant formula’s vital daigou channels. In addition, A2 Milk has also faced waning consumer demand and higher competition in China.

As a result of subdued demand, A2 Milk has also had to overcome excess inventory problems.

The full effect of these challenges was reflected in the company’s recent full-year report for FY21.

How did A2 Milk perform in FY21?

Late last month, shares in A2 Milk continued their decline following a dour FY21 result.

For the full year, the company reported a 30% decline in revenue to NZ$1.21 billion.

In addition, the former market darling noted a 77.6% reduction in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$123 million.

Other key points from A2 Milk’s report included;

Stock write-downs of NZ$109 million
Net profit after tax down 79.1% to NZ$80.7 million
Cash balance of NZ$875.2 million

A2 Milk advised investors that the company would review its growth strategy, given the rapid changes to its market.

Forecast for the A2 Milk share price

Unfortunately, A2 Milk has not painted a pretty picture of the company’s growth outlook.

These uncertainties were recently reflected in a bearish note from leading broker Credit Suisse.

According to the note, analysts retained an underperform rating on the infant formula giant with a $5.50 target for the A2 Milk share price.

Analysts noted that despite infant formula prices stabilising, slowing Chinese birth rates and other concerns could impact the company’s sales.

The post How does the A2 Milk (ASX:A2M) share price compare to the ASX 200 today? appeared first on The Motley Fool Australia.

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More reading

Here are the top 10 ASX 200 shares on Thursday – yes there were some

Why is the ASX share market down today?

Tech shares leading ASX 200 (ASX:XJO) losses on Thursday

ASX 200 (ASX:XJO) midday update: Tech shares fall, Fortescue upgraded

5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Nikhil Gangaram owns shares of A2 Milk. 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.

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