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The stock market reacted strongly to the news that a2 Milk has cut its revenue forecast for 2021.
The NZX 50 Index ended the day at 12,682, down 1.6 percent.
Thursday’s suspension of trading on a2 shares was lifted Friday afternoon after the company announced a lowering of its first-half revenue forecast to $ 670 million, and between $ 1.40 billion. to $ 1.55 billion for the entire year.
That was well below the stellar 2020 full-year revenue of $ 1.73 billion, and its September guidance of $ 1.8 billion to $ 1.9 billion, with $ 725 million to $ 775 million for the first half.
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The NZX had been trading positively prior to the news.
Hamilton Hindin Greene investment advisor Mark Hampton said the afternoon’s trading reflects investors’ disappointment in a2.
Shares in a2 fell to $ 11, down 22.1% from the stock price before the trading break.
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A2 has cut its revenue forecast for 2021, leaving investors disappointed.
The market was expecting an earnings cut, however, what was announced was much worse than expected, Hampton said.
“The fact that the margin is shrinking as well is not very good,” Hampton said.
“This is just another thing in a series of bad news for them. The high dollar, the political relationship between Australia and China hurt them, and I would say that much of this stock price drop reflects a bit of disappointment from the shareholders of the company itself. “
The fact that a2 reiterated its earnings guidance on Nov. 18 left investors wondering how much it could have changed in one month, particularly since that month included Singles’ Day, which was normally a period of big sales, Hampton said.
“At best management was being very optimistic, at worst it was being a bit naïve about any possible recovery.”
Synlait Milk halted operations following the announcement of a2.
While a2 was the biggest news to hit the market on Friday, other issues also emerged throughout the day.
A new Covid-19 community cluster in Sydney dragged travel industry stocks in New Zealand and Australia.
Air New Zealand shares fell to $ 1.81, down 2.95 percent.
Auckland International Airport shares also fell to $ 7.84, down 2.73 percent.
“Part of the reason we’ve had such good days recently is that they have all been positive news on the Covid-19 front,” Hampton said.
“But the Sydney thing is to remind people that we won’t be out of the woods until we have this widely distributed vaccine.”
The strength of the New Zealand dollar is also affecting the stock market, he said.
