a2 Milk (A2M) shares fall sharply
Stock
A2 Milk (A2M) $13.77 as at 21/08/2019
Event
The market leading infant formula company a2 Milk has seen its share price tank today despite showing significant growth across the business. A2M saw sales climb 41.4% dropping down to a 47% lift in profits, however it still fell shy of the street’s expectations, missing NPAT forecasts by 3%.
More pressing for the company was the outlook that didn’t live up to the hype. The company said they expected EBITDA margins “to be broadly consistent with 2H19” at 28.2%. Based on consensus FY20 sales of $NZ 1.66b, this would drop down to an EBITDA number for $NZ 468m, 12% below the current average forecast at $NZ 532m.
A2 Milk trades on a PE in the mid 20’s and needs to show strong growth to justify it. With growth for next year now looking like it will be closer to 10% rather than 20%, the market has taken to the stock with A2M trading around 14% lower.
A2 Milk (A2M) Chart
Market Matters Take/Outlook
