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Should you buy the dip in the a2 Milk (ASX:A2M) share price?

After slumping 11.4% lower on Monday, is the A2 Milk Company Ltd (ASX: A2M) share price one of the best buys on the market?
The post Should you buy the dip in the a2 Milk (ASX:A2M) share price? appeared first on Motley Fool Australia. –

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The A2 Milk Company Ltd (ASX: A2M) share price was hammered on Monday, but I think there could be a chance to buy.

Why was the a2 Milk share price hammered?

Shares in the Kiwi dairy group fell 11.4% lower to $15.20 per share by Monday’s close. That came on the back of an earnings update which flagged a weaker outlook for FY21.

a2 said that disruption to its lucrative ‘daigou’ channel is starting to hit the company’s earnings figures. That’s especially the case with the ongoing coronavirus restrictions in Victoria at the moment.

Daigou is the term used to describe individuals or groups that purchase items outside of China to send back to Chinese customers. Infant formula is one of the major items in the daigou trade which contributes approximately a third of a2 Milk’s revenue.

a2 is forecasting half-year revenue down 3.9% to 10.1% to between NZ$725 million to NZ$775 million. Full year revenue is expected to increase by 4.0% to 9.8% in a range of NZ$1.8 billion to NZ$1.9 billion.

Investors were bearish on the latest update and sent the a2 Milk share price plummeting lower in Monday’s trade.

Is the Kiwi dairy share in the buy zone?

The other concern that I have is the heavy insider selling we’ve seen in recent times.

According to an article in the Australian Financial Review, some heavy-hitters have been selling down. That includes big sales from a2’s CEO and chair when the a2 Milk share price was at a record high in late August.

However, the big dip could see investors tempted to buy back in. Today’s update said that China sales remained otherwise strong and growth was tracking well.

That could be good news for future growth beyond yesterday’s share price slump. A 11.4% dip suggests it could have been oversold and is a buy right now. 

That’s especially the case if we see further insider buying in the coming days.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Should you buy the dip in the a2 Milk (ASX:A2M) share price? appeared first on Motley Fool Australia.

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