The Costa Group Holdings Ltd (ASX: CGC) share price has been sold off on Monday.
In morning trade, the horticulture companyâs shares were down as much as 12% to a two-year low of $2.52 before being paused.
Whatâs going on with the Costa share price?
The catalyst for the Costa share price selloff on Monday appears to have been the release of a broker note out of Credit Suisse this morning.
According to the note, the broker has downgraded the companyâs shares to a neutral rating and slashed the price target on them by 24% to $2.80.
Credit Suisse made the move after revising its earnings estimates lower. These revisions were driven largely by weaker avocado prices, supply chain headwinds, and its expectation for a poor citrus season.
In respect to the latter, the broker notes that the current citrus season is on track to fall well short of expectations due to diseases impacting harvests.
As a result, it is now forecasting EBITDA well short of consensus estimates.
It expects EBITDA of $244.3 million in FY 2022 and $280.5 million in FY 2023. This compares to consensus estimates of $275 million and $302.3 million, respectively.
Is there anything else?
As things stand, it is unclear if there is anything else that is weighing on the Costa share price. Particularly given that a 12% decline seems quite severe for a broker downgrade to neutral.
However, all will be revealed later this afternoon. Thatâs because the company appears to have been sent a price query request or speeding ticket from the stock exchange operator. This happens when a share makes a big move on high volume and no announcement.
The pause in trading announcement states:
Trading in the securities of the entity will be temporarily paused pending a further announcement.
The post Why is the Costa share price sinking 12% to a two-year low? appeared first on The Motley Fool Australia.
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More reading
- ASX 200 midday update: EML crashes amid CEO exit, Costa and Domino’s sink on broker downgrades
- Top broker names 3 of the best ASX 200 shares to buy in FY23
Motley Fool contributor James Mickleboro 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 recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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