A2 Milk Company Ltd shares crushed: Should you buy the dip?

In morning trade the A2 Milk Company Ltd (ASX: A2M) share price has been crushed following the release of a trading update and full-year outlook.

At the time of writing the A2 Milk Company share price has just opened the day down a sizeable 19% to $9.72.

What happened?

This morning the fast-growing infant formula and dairy company reported that total revenue for the nine months to March 31 was NZ$660 million, up 70% on the prior corresponding period.

Management believes this puts it on course to deliver total revenue of between NZ$900 million and NZ$920 million in FY 2018. This will be an increase of 64% to 67% on FY 2017’s result.

While this is undoubtedly a strong result, it has fallen short of the market’s lofty expectations for revenue of circa NZ$950 million.

Because a2 Milk Company’s shares are priced to perfection and at a significant premium to the market average, a miss of this nature is always going to get punished unfortunately.

Is this a buying opportunity?

While I would suggest investors let the dust settle first, I do think that this sizeable decline is a buying opportunity.

Today’s decline is clearly a big disappointment for shareholders, but I have little doubt in my mind that the company’s shares will be significantly higher than the last close price within a couple of years or even sooner.

So rather than rushing to sell on this news, it could pay for shareholders to hold on patiently for the long-term. And should your portfolio be diverse enough, it could even be worth averaging down once its share price settles.

After all, this is a company which is experiencing such incredible demand for its products that supermarkets have had to restrict purchases and put product behind the counter.

The same applies for rival Bellamy’s Australia Ltd (ASX: BAL) which has also been dragged down on the back of this news.

In the meantime, while the dust settles, these exciting growth shares could be great options for investors.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro 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 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!