Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Could the Blackmores share price fall another 18%?

It’s been a problematic year for Blackmores, with its share price collapsing a little more than 30% since January.

The stock market can be brutal, maddening and optimistic all at once.

The long-term price action of Blackmores is indeed something that would stir elation amongst early investors. In January 1999, Blackmores stock traded at just A$5.00 per share. Almost two decades later – in January 2016 – the Blackmores share price stood at an ambitious A$210.00 per share; a tidy increase of 4,100%.

The last few years by comparison have proven to be significantly less fortuitous. Had you invested around those peaks and held until today, you capital would have more than been cut in half.

Indeed, at the time of writing, Blackmores stock currently trades at the A$84.95 mark; a far cry from its relatively recent all-time peak. Such is the brutality of the markets, I guess.

A recent article from Reuters explains what triggered this calamity well:

‘Blackmores, once an investors’ darling as China’s appetite for health products drove double-digit annual sales growth, is now struggling with tougher import rules and a slowdown in consumer spending in its biggest overseas market.’

Chinese regulation has indeed minted – and stalled the growth of many aspirational ASX-listed companies. A2 Milk for example has been on a multi-year growth spree thanks to China’s fast growing middle-class. Bellamys by comparison saw its share price hammered as the company vied for – but never received the required regulatory approval to sell its infant formula in Chinese retail stores. As we previously wrote:

‘That approval never came – and indeed, remains pending.’

The Blackmores share price and Credit Suisse

Blackmores – like Bellamys – isn’t quite out of the woods just yet either.

Specifically, according to the banking giant Credit Suisse, there remains more downside still for the Blackmores share price. Specifically, the investment bank just today downgraded the stock from ‘neutral’ to ‘underperform’ and hit Blackmores with a 12-month price target of A$69.00 per share.

At current price levels and not including dividends, this would imply a potential further share price decline of around 18.7%.

Importantly, Credit Suisse does somewhat hopefully postulate that there is potential of a turnaround story or even a takeover – potentially like the one Bellamys recently received.

Yet on the basis of valuation, Blackmores still trades at a heady set of estimated multiples: 31 times FY20 EPS and 26.5 times FY21 EPS. In step with this, the bank has reduced its EPS forecasts for Blackmores, which currently sit at A$2.79 (FY20), A$3.27 (FY21) and A$3.59 (FY22)

Mind you, even with this underperform rating and EPS reduction, Credit Suisse was impressed by Blackmores recent management shake-up and critically believes that growth will resume in FY21.

The question remains then: can investors wait that long?

Or maybe a better question: is there actually a turnaround story here as Credit Suisse so suggests?

Only time will tell.

Practise trading Australian stocks like Blackmores and a2 Milk with an IG demo account now

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Act on share opportunities today

Go long or short on thousands of international stocks with spread bets and CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Take your position
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

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.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets 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 spread betting and CFDs.

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