Why is the Blackmores share price sinking 8% to a 52-week low?

Blackmores shares have the blues on Wednesday…

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Blackmores Limited (ASX: BKL) share price has taken a tumble on Wednesday.

In afternoon trade, the health supplements company’s shares are down over 8% to a 52-week low of $65.51.

Why is the Blackmores share price tumbling lower today?

The weakness in the Blackmores share price today appears to have been driven by a broker note out of Morgans.

According to the note, the broker has retained its hold rating but cut its price target on the company’s shares by 20% to $70.50.

What did the broker say?

Morgans made the move on the belief that Blackmores’ second half of FY 2022 has been far more challenging than it was expecting. This is due to lockdowns in China and the east coast floods. It explained:

BKL’s 2H22 has been challenging. In China, conditions have continued to worsen with the lockdowns in Shanghai likely impacting BKL’s supply chain and sales. Guidance was for China sales in the 2H to be less than the 1H (benefits from Singles Day), but up on the pcp. We now forecast 2H22 China EBIT to be down 26% vs 2H21.

In ANZ, the QLD/NSW floods forced some pharmacies that sell BKL’s products to close for an extended period. Omicron induced labour shortages impacting supply chains and manufacturing would have also negatively affected operations.

What about the future?

Looking ahead, the broker has warned that competition is heating up in the ANZ market. This follows comments out of rival Swisse, which laid out plans to win a greater market share.

Structural and competitive threats in ANZ will likely worsen in FY23. H&H (owner of Swisse) recently said it aims to increase its market share and reclaim its leadership position in key categories and channels. We think this will mean increased promotional activity and discounting in the grocery channel.

In light of the above, the broker feels that Blackmores won’t be able to achieve its FY 2024 growth targets. It concludes:

Given the world has changed since BKL set its FY24 growth targets almost a year ago, we think they now look too aggressive. Both Morgans (A$99.5m) and Bloomberg consensus (A$108.0m) are well below BKL’s FY24 EBIT target range of A$123.8-131.3m.

All in all, given this softer growth, the broker appears to be waiting for the Blackmores share price to fall a bit further before considering it as a buy.

Motley Fool contributor James Mickleboro 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 Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A young woman with her mouth open and her hands out showing surprise and delight as uranium share prices skyrocket
Broker Notes

Here are 2 ASX lithium stocks analysts rate as buys

These lithium stocks have been rated as buys today...

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Dividend Investing

Here’s the Telstra dividend forecast through to 2024

The Telstra dividend could be increasing in the near future...

Read more »

A person sitting at a desk smiling and looking at a computer.
Consumer Staples & Discretionary Shares

2 ‘high quality’ ASX shares now going for a discount: Elvest

While financial forecasts this reporting season might be scary, here is a pair of stocks that might resist the coming…

Read more »

Man sitting in a plane seat works on his laptop.
Travel Shares

It’s gained 60% in 2 years, does the Webjet share price still have room to grow?

The travel stock has blue skies ahead according to these brokers.

Read more »

Two men in business attire play chess.
Resources Shares

OZ Minerals ‘completely in play’: Broker on BHP takeover bid

BHP's bid for OZ Minerals may not be over...

Read more »

a corporate-looking woman looks at her mobile phone as she pulls along her suitcase in another hand while walking through an airport terminal with high glass panelled walls.
Travel Shares

‘Downside is less severe’: Why some brokers are still bullish on the Qantas share price

This airline could see its shares fly higher.

Read more »

Two boys lie in the grass arm wrestling.
Investing Strategies

‘Cult following’: Expert names 2 ASX shares worth buying in August

There are plenty of catalysts to choose from during reporting season. Here's a pair of stocks that might move upward.

Read more »

A man reacts with surprise when her see a bargain price on his phone.
Cheap Shares

‘Capital light and scalable’: Expert picks 2 ASX shares to buy now while CHEAP

Who likes bargains? Pick up these beauties from the discount bin, says one financial advisor.

Read more »