A2 Milk share price: interim results preview

With a2 Milk set to report its H1 results this Thursday, we examine some of the key developments that have impacted the company over the last six months.

A2 Milk share price: the last six months reviewed

a2 Milk (ASX: A2M) saw its share price open some 2% lower today. The broader market also took a hit in the first thirty minutes of trade, dropping ~120 points, or 1.7%.

A little before noon the stock had drifted even lower, down 2.88% – to $15.13 per share.

Yet amongst this volatility, it was revealed that J.P. Morgan today upgraded their share price target on the IMF stock, raising their price target on a2 Milk 13% to $13.90 per share.

Overall, the stock has performed well since bottoming-out in late-November – rising ~35% in that period.

Do you own a2 Milk stock? You can hedge your downside risk by trading CFDs now.

Surprisingly bullish indicators and shifting views

Looking at the driving forces behind this recent run-up: As we wrote last week, Citi analysts recently upgraded their rating on the stock to Buy, and posited that the Coronavirus pandemic may actually help push A2M’s second-half margins higher.

This is because ‘household stockpiling could result in stronger than expected sales and consumers increasingly staying at home may reduce the need for 2H20 trade and outdoor marketing activities,’ and ‘travel restrictions could help the company reduce its travel expenses,’ says the broker.

Mind you, the market looked to be growing more optimistic on A2 Milk – after a protracted period of pessimism – before the emergence of the Coronavirus. The main catalyst for this sentiment shift was a strategic re-focus, driven by a C-suite shake-up.

Back-tracking somewhat: it was in the wake of the company's FY19 results, that investor pessimism emerged in its most pronounced form.

Here, we wrote that:

‘a2 Milk’s earnings (EBITDA) came in 2.7% below the average analyst consensus, according to Bloomberg Data.’

Besides missing analyst earnings expectations, the second problem was a strategic one: the company’s previous CEO – Jayne Hrdlicka – was pursuing an aggressive expansion strategy – noting that the company expected to spend 12% of revenues on marketing in FY20, as part of the company's FY19 results.

That aggressive strategy didn’t sit well with investors or analysts: between August to November last year the stock crashed about 30%. Long story short, at A2’s 2019 AGM, the aggressive marketing plan was moderated, and not long after, Hrdlicka was ousted from the company, replaced by A2M’s previous CEO, Geoffrey Babidge, who is now serving as Interim CEO.

Though A2M would continue to expand, Mr Babidge reiterated that a greater focus would be placed on maintaining margins.

In a recent investor briefing it was flagged that:

'For 1H20, we anticipate revenue in the range of $780 million to $800 million with growth demonstrating strong performance against strategy. EBITDA margin % in 1H20 is expected to be in the range of 31-32%.'

Now, with A2M’s half year results due in just four days, on 27 February, investors and analysts will likely be keen to see if the company can hit those revised guidance figures.

Click here now to open a live IG Trading Account today.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.