A2 Milk Co Ltd (ASX: A2M) stock took a steep dive on the day the company reported its FY 2023 results on 21 August.
Despite reporting some solid financial metrics, the S&P/ASX 200 Index (ASX: XJO) dairy stock closed down 13.6% on the day.
Having promptly gained 5.9% the next day – and posted more modest gains over the following four trading days – the A2 Milk share price is now up 0.5% since taking that tumble.
The stock is currently trading for $4.29 a share, which leaves it down 13.2% since the day before the company reported.
For some context, the ASX 200 is up 0.4% over that same period.
So, should I buy A2 Milk stock on the back of that post-reporting share price slide?
Is the ASX 200 dairy stock now a buy?
Among the key financial metrics A2 Milk reported for FY 2023 was a 10.1% year on year increase in revenue, which came in at NZ$1.59 billion.
Net profit after tax (NPAT) increased 26.9% from FY 2022 to NZ$155.6 million. And the company ended the financial year with a cash balance of NZ$757 million.
Explaining why the A2 Milk stock took a big hit despite those strong figures, Motley Fool analyst James Mickleboro noted, "Its guidance for FY 2024 might have been a little on the light side."
Mickleboro also pointed out that the less than ideal picture the company painted for its important China market likely saw investors hitting the sell button on the day.
A2 Milk reported that China's infant milk formula market declined 12.1% in volume and 14.4% in value in FY 2023.
The company added that, "The number of newborns in China declined by 10.0% in CY22 to 9.6 million which is likely to decline further in CY23."
Which brings us back to our headline question.
What's the outlook for A2 Milk stock?
For some expert insight we turn to two leading brokers.
Following the FY 2023 results announcement, Bell Potter retained its hold rating and cut its price target for A2 Milk stock by 15% to $4.85 a share.
While the broker may have a hold rating, it's worth noting the reduced price target represents a potential 13% upside from the current share price.
Bell Potter said it expects the first half of FY 2024 will "be challenging given the China label transition and likely disruption as brands exit the market".
On the plus side for the ASX 200 dairy stock, Bell Potter added:
A2M has grown share in all key measures in a declining market and is well positioned to benefit from China market brand consolidation, stabilising birth rates, and the return of overseas travellers and students to Australia.
Morgans had a more bullish take on A2 Milk stock in the wake of its results.
The broker upgraded the stock to an add rating with a reduced price target of $5.40 per share. That represents a potential upside of 26% from current levels.
Morgans noted that management's "guidance was rightly conservative and has resulted in material earnings downgrades".
But its analysts are optimistic longer-term.
"While near term earnings uncertainty exists, we believe that decent growth should resume in FY25 and FY26," they said.
With two leading brokers flagging potential share price gains of 15% and 26% respectively, I'd say A2 Milk stock is well worth considering adding to my portfolio.
