ATM - A2 Milk Corporation Limited

[JohnnyTheHorse]

Besides the old adage of downgrades come in threes, here are a couple of tips for people to consider for stocks in monthly downtrends. Hopefully helps people learn.

- If holding, use a stoploss. Don't think that it can't get any worse, because it certainly can of often does. There were several very clear stoploss levels on a2 on the way down. E.g. After many attempts and failures at breaking AU$20, the clear stop loss was AU$17 (being the previous monthly higher low).

- If looking to buy, wait for a confirmed weekly uptrend and place a stoploss below the low. Do not try to pick the bottom! a2 has not been in a weekly uptrend, hence you should not have bought on the way down thinking it's cheap.

Feel free to PM if you wan to discuss further.

[Balance]

19m shares done on ASX so far - looks like many ‘long term’ holders fleeing out and they must be grateful that the shorters are there to take their stock!

So what happens when the shorters stop covering?

Impressive turnover on ASX (where it really counts instead of the NZX which is just a 'shunt' market) - 30m shares.

The analysts & brokers will be scrambling to adjust their forecasts after the third downgrade today so what will the next few days bring?

Not much credibility left in their forecasts as it's clear they blindly follow the company's guidance, guidance which is increasingly looking like stabs in the dark.

So will new CEO take a more considered & measured stab at F21 & F22 forecasts & initiate a fourth and savage downgrade?

[carrom74]

The last time Atm was in this price range was back in 2018 where they made $977m revenue. Now they are forecasting $1.4b with focus on finding and growing in new markets(us/canada etc). I know this stock”s price is based on historical exponential growth trajectory. But i am still finding it a bit strange on how the price gets slaughtered on already known facts(second downgrade).today’s volume is about 5%of the equity (approx)- ASX and NZX combined.

[Beagle]

Impressive turnover on ASX (where it really counts instead of the NZX which is just a 'shunt' market) - 30m shares.

The analysts & brokers will be scrambling to adjust their forecasts after the third downgrade today so what will the next few days bring?

Not much credibility left in their forecasts as it's clear they blindly follow the company's guidance, guidance which is increasingly looking like stabs in the dark.

So will new CEO take a more considered & measured stab at F21 & F22 forecasts & initiate a fourth and savage downgrade?

Well done mate. Downgrades almost always come in three's is something you know I have supported you on for many, many months with this one.
I see eps of approx 31 cps based on today's downgrade but I agree, the chance of another downgrade is very real and certainly more likely than not in my opinion.

My sense with this one is the brand value, IP and business case keeps getting weaker and weaker with every update. Pricing power and margins keep getting eroded at quite an alarming pace. I think growth in the future is going to be incredibly expensive to achieve in terms of marketing spend and will be far, far more modest than it ever has been in the past.

It appears A2 milk is steadily heading towards just being another common and everyday commodity with widespread brand proliferation, which undoubtedly will further reduce ATM margins in the future. First mover advantage only lasts so long...and then its gone.

ATM is yesterday's growth stock that's still priced on a forward PE of more than 30, (even after today's share price drop), like its going to resume growing strongly in the very near future. That's very unlikely in my opinion. I am happy to stay out and would never contemplate buying on a steep confirmed downtrend until a definite confirmed new base and new uptrend has been established. I don't believe that's going to happen anytime soon.

[Habits]

Well done mate. Downgrades almost always come in three's is something you know I have supported you on for many, many months with this one.
I see eps of approx 31 cps based on today's downgrade but I agree, the chance of another downgrade is very real and certainly more likely than not in my opinion.
To me the brand value, IP and business case keeps getting weaker and weaker with every update. Pricing power and margins keep getting eroded at quite considerable pace.
I think growth in the future is going to be incredibly expensive to achieve in terms of marketing spend and will be far, far more modest than it ever has been in the past.
I think A2 milk is steadily heading towards just being another common and everyday commodity with widespread brand proliferation further reducing ATM margins in the future.
First mover advantage only lasts so long...and then its gone.

Reading this assessment I get the impressions: Heading south... more stampedes

[winner69]

Guy from Hamilton Hinden not all that despondent -

He said the company remains confident in the underlying fundamentals of the business and would continue to invest in the brand and in its capability to drive long-term growth.

Its liquid milk businesses in Australia, its United States business and its Chinese-label milk formula business all increased revenue in the first half.

”There are some positives to be taken out of the growth that they are getting,” Davies said. ”Long term, the brand they have cultivated over the years is still very very strong.”

https://www.stuff.co.nz/business/124...utlook-weakens

[Baa_Baa]

Well done those who picked another downgrade, clearly ATM don't yet have a grip on their sales channels post covid, or expenses supplying their market in current state, or stock levels. Lots of things to fix. Yet. Still, they make a sh1tload of money.

That said, my opening stake is underwater but my second entry today is above, so far. I'm not talking about mortgaging the house or taking leverage on this, but I'm happy to take advantage of price weakness.

ATM aren't going out of business, $1.4b rev forecast, truckloads of cash in the bank and still very profitable with growing ancilliary markets.

Clearly it's not for some, but to use a cliche, "when others are fearful".

GLTAH. Investing is about the future. Just depends on how far into the future you look, and what you're prepared to pay for part of that future.

[Beagle]

Well done those who picked another downgrade, clearly ATM don't yet have a grip on their sales channels post covid, or expenses supplying their market in current state, or stock levels. Lots of things to fix. Yet. Still, they make a sh1tload of money.

That said, my opening stake is underwater but my second entry today is above, so far. I'm not talking about mortgaging the house or taking leverage on this, but I'm happy to take advantage of price weakness.

ATM aren't going out of business, $1.4b rev forecast, truckloads of cash in the bank and still very profitable with growing ancilliary markets.

Clearly it's not for some, but to use a cliche, "when others are fearful".

GLTAH. Investing is about the future. Just depends on how far into the future you look, and what you're prepared to pay for part of that future.

Understood you taking a modest position with a very tight stop when it broke up through the 30 day MA as TA clearly signaled a possible new uptrend forming but I'm sorry mate I'm a bit confused here...you've lost me with the rationale behind the TA now ?

I would have thought you would have been stopped out with your tight stop and left it at that as a losing trade, accepting one never wins every time and taken a step back and been philosophical about it.

We have a very clear downtrend for some 7 months now from $21.74. I doubt the TA legends Hoop or KW would touch this with a 40 foot barge pole. Good luck though mate, I think you are going to need it to get out of this hole.

Speaking of holes...ATM dragged the index into 10%+ correction territory today https://www.goodreturns.co.nz/articl...or+25+Feb+2021

[Biscuit]

.......still very profitable with growing ancilliary markets.

........Just depends on how far into the future you look....

They are profitable but with negative operating cashflow. That's not a good sign. The future's never rosy if you are bleeding cash.

[longy]

They are profitable but with negative operating cashflow. That's not a good sign. The future's never rosy if you are bleeding cash.

Please correct me if I am wrong but did they just bought a factory or two?