Here’s why the A2 Milk (ASX:A2M) share price is down 42% so far in 2021

It’s been a tough year for A2 Milk. We take a look at its major hurdle ahead of the company’s earnings report.

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The A2 Milk Company Ltd (ASX: A2M) share price has slid 43% since the start of 2021.

After opening the year at $11.65, its shares have since dropped to swap hands for $6.64 apiece.

Unsurprisingly, the milk and milk-based products producer’s shares have performed significantly worse than the broader market.

In 2021, the S&P/ASX 200 Index (ASX: XJO) has gained 12.2%, while the All Ordinaries Index (ASX: XAO) has increased by 11.7%.

Let’s take a look at what’s been impacting the A2 Milk share price through 2021.

What’s driving the A2 Milk share price down?

While the A2 Milk share price has been sliding, the company has remained relatively quiet. In fact, the market hasn’t heard any news from it since May.  

However, A2 Milk’s most recent announcement highlighted the company’s struggles against the COVID-19 pandemic.

In May, A2 Milk reported it was changing tack on how it’s addressing the fall of the daigou network and cross-border e-commerce channels that it once relied on. It also downgraded its guidance for financial year 2021 for the fourth time.

The A2 Milk share price crashed 13% on the back of the new plan. Unfortunately, the market seemingly hasn’t changed its view on the company since.

Perhaps it was because A2 Milk was restating the same message it had been for many months prior. Without an international reseller network and Chinese demand for its infant formula products, the company’s revenue had slowed significantly.

In May, A2 Milk downgraded its financial year 2021 guidance. It stated it expected to report revenue of between $1.15 billion and $1.2 billion (converted from New Zealand Dollars at the exchange rate of the time of writing).

For comparison, the company reported $1.65 billion in revenue for the 2019 financial year (once again, converted from New Zealand Dollars).

Whether A2 Milk’s guidance came to fruition will be answered tomorrow. The company is expected to report its results for financial year 2021 on Thursday.

All eyes will be on the A2 Milk share price to see if the company’s outlook for financial year 2022 is more optimistic.

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Motley Fool contributor Brooke Cooper 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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