A: Although I have been a buyer of A2 Milk, I feared a ‘fourth downgrade” which is what we got on Monday. Unfortunately, that didn’t leave me with a heap of confidence that all the bad news is out. Stock write-offs are easy to understand, but the challenges with re-starting the daigou trade and increasing competitive pressure impacting its Chines label brand remain headwinds.

The brokers have turned somewhat bearish. According to FN Arena, of the 7 major brokers, there are 2 buys, 1 neutral and 4 sells. The target price has been cut to $6.30, about 11% higher than the last price of $5.68. Range is a low of $5.00 to a high of $7.70.

I have been a big fan of this company – but I have to admit I have been wrong. I think the A2 brand and business is a valuable asset to a foreign competitor, potentially making A2M  a takeover target. This will help to put a floor under the price. But in the short term, I can’t see the catalyst for the market to re-rate. Management has lost all credibility with the market. Time is on your side, buyers will need to be patient.