Costa (ASX:CGC) shares dropped 27% in May. Here’s why

24% of the drop in value for the agriculture company came in one day.

| More on:
falling asx share price represented by child looking shocked at computer screen

Image source: Getty Images

The Costa Group Holdings Ltd (ASX: CGC) share price was not one of the better ASX performers over the month of May. Costa shares had a rough month, falling from the $4.66 level they started May at to finish up the month at $3.40 a share. That’s a fall of 27%. Ouch.

The worst came for Costa shareholders right at the end of the month. Until 26 May, Costa shares ‘only’ lost around 6% over the month. But on 27 May, things went from bad to worse for the agricultural company.

Costa shares lost more than 24% of their value on 27 May when the company released an update to its 2021 guidance during its annual general meeting.

Costa told investors that while the company was experiencing strong international demand for its products, it is currently facing some headwinds in the domestic markets. While berry and avocado production is strong, Costa told the markets that its mushrooms, citrus and tomato segments are all facing various short-term issues.

As a result, Costa CEO Sean Hallahan told investors the following:

Overall, first half performance is expected to be marginally ahead of the previous comparable period in CY20, with strong international operations offset by challenges in domestic produce conditions. This also once again highlights the importance of the diversity of our portfolio.

This is what seems to have spooked investors, and resulted in most of the Costa share price weakness over the month of May. The shares have slightly recovered in June so far, up 0.6% against where they ended May at. That includes a 2.4% bounce today, which puts Costa at $3.43 a share at the time of writing.

About the Costa share price

Costa has been a company that has experienced a lot of ups and downs over the past 5 years. Back in mid-2018, the company was riding high on a strong market, which resulted in Costa shares rising to over $8. But it’s been a volatile ride ever since. In late 2019, Costa was down to roughly $2.44 a share on the back of difficult growing conditions. The company recovered pretty strongly over the following 18 months, rising almost 100% between December 2019 and April 2021.

However, last months’ moves have dented that recovery and Costa is now 40% above those 2019 lows today.

At the current share price, Costa has a market capitalisation of $1.38 billion, a price-to-earnings (P/E) ratio of 22.6 and a trailing dividend yield of 2.62%.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers