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Why the Tassal Group Limited share price is sinking lower this week

Salmon producer Tassal Group Limited (ASX: TGR) has been one of the worst performers on the Australian share market this week with the price of its shares falling 9% to $3.64. The reason for the sharp decline can be attributed to broker Ord Minnett slashing its price target from $5.00 to $3.43.

The broker is incorporating lower export prices into its forecasting model following a 32% drop in international salmon prices since May.

The stock fell on heavy volume yesterday with 5.89 million shares swapping hands and managed to hit a new 52 week low of $3.45 before bouncing. During FY17, Tassal battled difficult domestic conditions with revenue from Australia declining 2.8% to $401 million. The company’s focus on export markets resulted in a 238% increase in export revenues to $44 million which helped fuel an increase in the company’s bottom line.

The bad news was not just limited to Ord Minnett, with broker JPMorgan also downgrading Tassal to underweight.

Interestingly, Ord Minnett also slapped a buy rating on Tassal’s major rival  Huon Aquaculture Group Ltd (ASX: HUO) with a $5.81 price target, inferring a 35% gain from Huon’s current price of $4.30.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

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