It certainly has been a sour 12 months for the A2 Milk Company Ltd (ASX: A2M) share price.
Since this time last year, the fresh milk and infant formula company's shares have lost a massive 64% of their value.
This means that if you had invested $10,000 into A2 Milk shares in August 2020, your investment would only be worth $3,600 today.
But that's not the full story. During this time, the S&P/ASX 200 Index (ASX: XJO) has recorded a 21% gain. This means that a $10,000 in an ASX 200 tracking ETF would have grown to be worth $12,100 over the 12 months.
That's a difference of $8,500, which unfortunately rubs more salt into the wounds.
Why is the A2 Milk share price underperforming the ASX 200?
The weakness in the A2 Milk share price has been driven by its abject performance over the period and management's even more abject failure to accurately predict the extent of the tough trading conditions.
A year ago, management was predicting strong FY 2021 revenue growth, with an earnings before interest, depreciation and amortisation (EBITDA) margin of 30% to 31% in FY 2021.
This compares to FY 2020's revenue of NZ$1.73 billion and EBITDA of NZ$549.7 million.
Downgrade one
After reaffirming its guidance on 9 September, less than three weeks later management warned that it now expected revenue of NZ$1.8 billion to NZ$1.9 billion. This represents modest growth of 4% to 10% year on year.
Despite this, it held firm with its EBITDA margin guidance of ~31%, representing EBITDA of NZ$558 million to NZ$589 million.
Number Two
In the middle of December, the cracks really started to show. At that point, management warned that the recovery in the daigou channel was not happening as planned.
This led to a revenue guidance downgrade of almost half a billion dollars to NZ$1.4 billion to NZ$1.55 billion. Management also took a hammer to its margin guidance, downgrading it to 26% and 29%. This implies EBITDA of NZ$364 million to NZ$450 million.
The A2 Milk share price lost around a third of its value that day.
Strike three
The A2 Milk share then lost almost 20% of its value on 25 February when it released its half year results and downgraded its FY 2021 guidance again.
At that point, management was expecting revenue of NZ$1.4 billion with an EBITDA margin of 24% to 26% (excluding acquisition costs). The latter represents EBITDA of NZ$336 million to NZ$364 million.
Fourth time lucky
Finally, on 10 May, the company downgraded its guidance for a fourth time to revenue of NZ$1.2 billion to NZ$1.25 billion with an EBITDA margin of just 11% to 12% (excluding acquisition costs). The latter implies EBITDA of just NZ$132 million to NZ$150 million. This be a reduction of 73% to 76% year on year.
The company's guidance includes an inventory provision of approximately NZ$80 million to NZ$90 million, in addition to the NZ$23 million provision recognised in the first half.
Where next for the A2 Milk share price?
Opinion remains incredibly divided on where the A2 Milk share price is heading next.
For example, analysts at UBS appear to believe the worst is behind the company. They have a buy rating and NZ$12.00 (A$11.42) price target on its shares.
Whereas the team at Credit Suisse have an underperform rating and $5.50 price target on its shares.
Based on the current A2 Milk share price of $6.61, these price targets imply potential upside of 73% and downside of 17%, respectively.
Which broker makes the right call, time will tell. A2 Milk is due to release its full year results on 26 August.
