A2 Milk Co Ltd (ASX: A2M) shares are slipping today.
Shares in the S&P/ASX 200 Index (ASX: XJO) dairy company closed down a sharp 12.0% yesterday, at $8.04. During the Tuesday lunch hour, shares are changing hands for $7.95 apiece, down 1.1%.
For some context, the ASX 200 is up 0.6% at this same time.
Before we look at whether now could be an opportune time to buy the dip in the infant formula stock, let's see why investors were favouring their sell buttons on Monday.
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Why did the ASX 200 stock tumble on Monday?
Almost 9.4 million A2 Milk shares swapped hands yesterday, with the ASX 200 stock, as mentioned up top, ending the day down 12.0%.
This came after the company released a trading update highlighting supply and product availability issues in its key China market.
Unexpected headwinds included tighter Chinese customs requirements as well as rising air and sea freight costs amid surging global energy prices.
As The Motley Fool reported yesterday, "While these supply chain disruptions are largely considered temporary, they are expected to materially affect fourth quarter sales, particularly during April and May."
In light of this, management downgraded the company's full year FY 2026 revenue growth forecast to be in the low to mid double-digit percent range. That's down from prior guidance of mid-double digit percent revenue growth.
Earnings are also likely to take a hit, with FY 2026 earnings before interest, taxes, depreciation and amortisation (EBITDA) margin guidance lowered to 14.0% to 14.5%. That's down from the prior guidance of 15.5% to 16.0%.
Which brings us back to our headline question…
Is now a good time to buy A2 Milk shares?
Following on Monday's update, the team at Citi ran their slide rule back over A2 Milk shares (courtesy of The Australian Financial Review).
Commenting on the company's supply chain issues, Citi analyst Sam Teeger said:
We see risk that these constraints may persist for longer than expected, and even when they are resolved, it may not be easy or cheap for a2 to win back consumers who have switched to competitor brands.
Atop A2 Milk potentially losing market share amid these largely external constraints, Teeger added, "The stock's valuation also doesn't leave much scope for anything but flawless execution."
Citi reduced its FY 2026 earnings forecast for A2 Milk by 9%, and reduced the ASX 200 stock to a neutral rating.
The broker also cut its target price for A2 Milk shares by 20% to $8.40. Still, that's 5.7% above the current share price.
