A2 Milk (ASX: A2M) share price looks good this week //...

A2 Milk (ASX: A2M) share price looks good this week //...
A2 Milk (ASX: A2M) share price looks good this week //...
For now A2 Milk Company Ltd. (ASX: A2M) Share Price I think it looks like a great buy this week.

A2 Milk’s share price has fallen 16.4% since September 25, 2020. Since July 30, 2020 it has fallen by 28%.

When a great deal drops that much, I think it can open up a really good buying opportunity.

What’s happening?

When A2 Milk released its FY20 results, the company found that uncertainties remained due to COVID-19. It warned that there was potential for economic activity to slow down. A2 Milk said there could be an impact on consumer behavior in its core markets as well as on participants in the supply chain, particularly in China.

The price of the A2 Milk share has since fallen from its height.

A couple of weeks ago, A2 Milk issued an updated outlook for FY21. It was said to have had an impact on the downsizing of pantries in FY21 and disruptions to the company’s Daigou and reseller channels. Tourism from China and the number of international students have declined, particularly due to the fourth tier lockdown in Melbourne.

A2 Milk expects baby formula sales in Australia and New Zealand to continue to be disrupted for the remainder of the first half of fiscal year 21 as Daigou accounts for a significant portion of sales. For this reason, domestic sales are expected to be well below expectations in the first half of the year.

Revenue for the first half of fiscal year 21 is expected to be between NZ $ 725 million and NZ $ 775 million. That would be a drop in sales of 4% to 10%. Predicting a drop in sales is pretty disappointing.

For the year as a whole, however, A2 Milk continues to expect sales growth. The sales forecast for FY21 was between NZD 1.8 billion and NZD 1.9 billion. That would be an annual growth of 4% to 10%.

However, the market had expected more, which is why the price of the A2 Milk share fell.

Why I think the A2 Milk share price is a buy

A2 Milk is one of the best companies on the ASX. It has a growing distribution network, particularly in the US and China.

In the latest sales update, A2 Milk said the underlying growth of its Chinese infant formula brand is strong. Consumers in China still want A2 dairy products. It only takes a little while for the products to get to you.

I don’t think a company should be sold because of short term problems. The fourth tier bans in Melbourne are nearing the end, which should help. A2 Milk is expanding its distribution to support direct sales in the countries where it sells.

Keep in mind that A2 Milk is still rapidly increasing the number of stores selling its products across China and the United States. In fact, thousands of stores are added every year.

The fact that A2 Milk continues to expand its market share is imperative for long-term growth as it can take a while to attract new customers.

A2 Milk is now starting to sell products in Canada through the agreement with Agrifoods. Canada has a larger population than Australia and New Zealand combined, so it’s a sizable market to expand into. In my opinion, further geographic growth is exciting.

Stupid takeaway

The A2 Milk share price appears to me to be attractively cheap. It is trading at just 23x the estimated profit for fiscal 23rd. It looks even cheaper when you factor in the large cash balance. When you compare this rating to other popular ASX growth stocks, A2 Milk looks a much better buy in my opinion. I would like to buy A2 Milk shares this week.

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