Are the worst-performing ASX 200 shares turnaround opportunities?

A few ASX 200 shares have suffered over the past year. Are they buys?

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There have been some painful declines in the S&P/ASX 200 Index (ASX: XJO). Some ASX 200 shares have seen declines of at least 50%.

Sometimes declines of share prices can be due to overall market declines where investors punish most businesses indiscriminately at the same time. However, over the past year the ASX 200 has risen by 9%, so it has been a decent time for the overall market.

Other times, it’s a company going through business-specific problems which is causing investors to lose faith.

After heavy declines, are these three ASX 200 shares turn around opportunities?

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a fund manager which predominately invests in international shares for investors. But it also has a sizeable amount of funds under management (FUM) allocated to infrastructure and Australian shares too.

Over the past 12 months, the Magellan share price has fallen 60%. Its investment fund performance from mid-2020 has underwhelmed investors. Magellan recently lost the investment mandate from St James’ Place which represented approximately 12% of the current annual revenue.

Some analysts think that Magellan’s FUM and net flows could be challenged for years, with UBS suggesting that the fund manager may need to cut its management fees or lose even more FUM. That’s why UBS rates it as a sell with a price target of $17.

Even Morgans, which has been positive on the ASX 200 share, currently rates Magellan as a ‘hold’ with a price target of $24.73. It wants to see that the Magellan fees and FUM situation stabilises.

Afterpay Ltd (ASX: APT)

The Afterpay share price has halved over the past year. Indeed, many of the ASX’s buy now, pay later (BNPL) companies have suffered in recent months including Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL).

Whilst Afterpay continues to see its volumes and customer numbers grow, that growth has been slowing.

Brokers are seeing some of the headwinds for Afterpay, such as no surcharges on the buy now, pay later (BNPL) rules being changed as suggested by the Payments Systems Board.

Morgans currently rates the Afterpay as a hold, noting that that market isn’t a fan of the BNPL industry at the moment. The Morgan price target is $92, suggesting a rise of more than 30%. At the moment, the Afterpay share price is heavily influenced by the Block share price due to the upcoming planned merger which will be paid in Block shares.

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price dropped by around 48% over the past year.

It has suffered with lower demand, lower revenue and sinking profit. The ASX 200 share’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin is now much lower than it was before 2021. However, management think the margin can improve over time.

Overall demand from Chinese customers and daigou is now lower than it used to be. Local Chinese infant formula brands have been taking market share from international players like A2 Milk.

Citi thinks A2 Milk can turn things around as the inventory is now fresh and in an improved position. It also notes A2 Milk is doing a number of initiatives to make things better. Citi rates A2 Milk as a buy with e price target of $7.30.

However, not every broker is confident on the turnaround. Macquarie rates A2 Milk as a sell, with a price target of just $5.20 with growth looking unsure and the profit margin not looking as though it will be strong.

Motley Fool contributor Tristan Harrison owns Magellan Financial Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Afterpay Limited and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Afterpay Limited. The Motley Fool Australia has recommended A2 Milk and Macquarie Group Limited. 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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