Although the S&P/ASX 200 Index (ASX: XJO) is closing in on a record high, not all shares are performing as positively.
Two ASX shares that have just fallen to 52-week lows or worse are listed below. Here’s why they are down in the dumps:
A2 Milk Company Ltd (ASX: A2M)
The a2 Milk share price hit a multi-year low of $7.13 on Monday. Investors have been selling the infant formula company’s shares for a number of reasons.
The main one is the fact that it has downgraded its earnings guidance multiple times during the last 12 months. This has been driven by significant weakness in the daigou channel and management’s failure to accurately predict its recovery.
Unfortunately for shareholders, one of the most supportive brokers, Morgans, has lost faith and downgraded its shares last week.
It notes that ecommerce platform pricing in China isn’t improving and in Australia it has seen retailers and pharmacies discounting stock to clear ageing inventory.
Morgans feels this could be bad news for the company. It explained: “A2M needs pricing to rise so that reseller margins improve and therefore demand for its products increase. Our industry feedback suggests that there has been no real improvement in the underlying operating environment.”
As a result, it thinks that its FY 2021 guidance will be difficult to achieve.
Adore Beauty Group Limited (ASX: ABY)
The Adore Beauty share price dropped to a record low of $4.52 on Monday. This means the online beauty retailer’s shares are now trading 33% lower than their October IPO listing price of $6.75.
Several disappointing updates from ecommerce companies this month have weighed heavily on investor sentiment and put significant pressure on the Adore Beauty share price.
This is despite the company’s performance in FY 2021 tracking ahead of its prospectus forecasts. For example, during the first half of FY 2021, the company had almost 800,000 active customers. From these, it generated revenue of $96.2 million, up 85% on the prior corresponding period.
Morgan Stanley appears to believe the weakness in the Adore Beauty share price is a buying opportunity. It currently has an overweight rating and $8.75 price target on its shares.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Adore Beauty Group Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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