When was the worst ever day for the A2 Milk (ASX:A2M) share price?

A2 Milk has had a number of double-digit down days. But which one was the worst?

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The A2 Milk Company Ltd (ASX: A2M) share price now looks as though it’s taken a page out of AGL Energy Limited (ASX: AGL) or Myer Holdings Ltd (ASX: MYR)’s books.

Shares in the ex-market darling have been trending lower since late July last year, losing more than 70% in value during this time.

Right in the middle of the decline marked the worst ever day for the A2 Milk share price, which plummeted 23.7% on 18 December from $13.26 to $10.12.

Why did the A2 Milk share price fall off a cliff?

Things went from bad to ugly for the infant formula business following the release of updated half-year and full-year FY21 guidance.

This is when A2 Milk flagged a far greater and protracted disruption to its all-important daigou channel.

The continued underperformance was driven by the flow-on effect of pantry destocking following a strong sales uplift in the 2020 third quarter and a weak retail daigou performance in Australia as a result of reduced tourism and international students.

A2 Milk would issue grim FY21 guidance which included:

The new figures would imply a year-on-year revenue decline between 11.9% and 20.5%.

It only got worse from there

The A2 Milk share price would continue to fall sharply on two separate occasions.

The release of the company’s half-year FY21 results on 25 February would witness a 16% tumble from $10.45 to $8.76.

This was heavily influenced by yet another guidance downgrade which expected:

  • FY21 revenue of NZ$1.4 billion.
  • EBITDA margin between 24% and 26%.

Just three months later, on 11 May, the A2 Milk share price would stage another double-digit decline, sliding 18.6% from $7.02 to $5.71.

Why you might ask?

Another guidance downgrade. This time, forecasting:

  • FY21 revenue between NZ$1.2 billion and NZ$1.25 billion.
  • EBITDA margin between 11% and 12%.

After multiple downgrades, A2 now expects FY21 revenue to decline 29% to 31% against FY20 figures. Meanwhile, EBITDA margins have tumbled all the way from 26.4% to a forecast 11% to 12%.

What to expect this earnings season

A2 Milk is expected to report its full-year FY21 results on Thursday 26 August.

With results right around the corner, here’s a preview of what investors might be able to expect.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. 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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