Down 39% in 2026, is this ASX 200 stock becoming a falling knife?

A2 Milk Company Ltd (ASX: A2M) shares are under pressure again on Wednesday as investors keep selling the infant formula stock.

At the time of writing, the A2 Milk share price is down 4.26% to $5.62.

Earlier today, the stock hit a new 52-week low of $5.60. The last time A2 Milk shares traded around these levels was back in January 2025.

It has been a rough fall for shareholders. A2 Milk shares are now down around 25% over the past month and 39% since the start of 2026.

The sell-off comes after a difficult run of company updates, broker downgrades, and concerns about the outlook for infant formula sales.

So, what has gone wrong?

Guidance cut

The biggest problem is still A2 Milk’s recent trading update.

In April, the company warned that supply chain disruptions were constraining product availability, despite strong underlying demand.

Investors were already focused on China before the update landed. The weaker guidance only added to concerns about demand and the extent of A2 Milk’s growth.

As part of the update, A2 Milk downgraded its FY26 outlook.

Revenue growth was reduced to low-to-mid double digits, while cash conversion was expected to fall to 50%.

The company also said it expected lower infant milk formula sales, mostly related to Chinese labels.

Margins are also under pressure, with A2 Milk’s EBITDA margin now expected to fall to between 14% and 14.5%. That’s down from its previous guidance range of 15.5% to 16%.

Brokers are losing patience

The recent weakness has also been made worse by broker commentary.

Citi reportedly downgraded A2 Milk shares to a sell rating, with a reduced price target of $5.85. The broker pointed to ongoing supply challenges, lower birth rates, and valuation concerns.

Other analysts have also taken a more cautious view.

Catapult Wealth has named A2 Milk as a sell this week, pointing to the supply chain issues and softer outlook.

Dolphin Partners Financial Services has also highlighted the pressure on the stock after the company’s downgrade and recent product recall in the United States.

The recall related to 3 small batches of product sold in the US. A2 Milk said the issue was isolated to US label product.

Foolish takeaway

A2 Milk’s share price fall shows how quickly confidence can change when a growth stock starts missing expectations.

The company is still profitable and demand has not disappeared. But investors are no longer giving it the benefit of the doubt while guidance is being cut and margins are moving lower.

Until A2 Milk can show it is back on track, the share price may struggle to find much support.

The post Down 39% in 2026, is this ASX 200 stock becoming a falling knife? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of Motley Fool Money. Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.