Blackmores Limited Shares are Down 20%. Here’s Why! (ASX: BKL)

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ASX BKL - Blackmores Share Price

Dear Reader,

The share price of Blackmores Limited [ASX:BKL] were down 20% earlier today.

Investors are exiting after the company emerged from a trading halt to announce a profit downgrade.

The market will punish any stock that does this. BKL is no exeption.

But that’s not all…

The company is also going too suspend its interim dividend payment.

Should this be considered an opportunity to buy BKL?

Today, we’ll take a look at this idea.

But first…

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Who is Blackmores Limited [ASX:BKL]?

Blackmores Limited is an Australian health supplement company.

They’re a well known brand. You may have bought some of their products before at Chemist Warehouse or Priceline…

Before the open today, the company had a $1.56 billion market cap.

Today, that market cap has been smashed.

The company is partly blaming the coronavirus. The chief executive of Blackmores said today:

The outbreak had increased demand in key immunity products in Australia and Asia such as vitamin C, but that had been countered by supply chain disruptions across the region.

The Australian Financial Review added…

Some e-commerce partners in China had cancelled or modified February promotions because of a slowdown of in-bound and internal freight services. This had caused supply chain blockages and made it ”difficult” to service the China market with much-needed product.

However, a review of Blackmores trading update says the coronavirus is not the only issue impacting the company.

But it is no doubt important. Blackmores previously enjoyed stellar growth in the past thanks to China.

Without China, that bright outlook takes a hit.

So is now the time to buy Blackmores?

To answer that, let’s take a look at the relevant chart.

Below you can see this…

ASX: BKL Long-term trend is down

ASX BKL Share Price Chart - Blackmores

Source: Optuma

[Click to open in a new window]

BKL is down over 60% from its al time high in 2016.

It’s a volatile and unpredictable stock.

Each time the company looks like its making a recovery…it gets sold down again.

Experience tells me to avoid stocks that announce a profit downgrade. It takes time for them to rebuild the confidence of the market.

There may be an opportunity a little further in the future. So it might be worth keeping this on the watchlist.

As always, this is not a recommendation to buy or sell BKL. It is an update only. I hope you found it useful.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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