Why the Bubs Australia share price jumped 14% to a new high today

The Bubs Australia Ltd (ASX:BUB) share price has been a big mover on Tuesday. Here's why the infant formula company's shares rocketed higher…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the best performers on the All Ordinaries index on Tuesday was the Bubs Australia Ltd (ASX: BUB) share price.

The goat milk infant formula company's shares jumped a massive 14% to reach a new high of 99 cents today.

When the Bubs share price hit this level it meant they had gained an impressive 115% since the start of the year.

Why is the Bubs share price rocketing higher?

Investors have been buying the company's shares following the release of two positive announcements last week.

On Thursday Bubs announced the signing of a binding heads of agreement with the Chemist Warehouse Retail Group to form a four-year strategic alliance relating to the sale and promotion of its products in Chemist Warehouse stores.

The agreement is expected to commence on June 1 and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and Tmall online stores.

The latter is perhaps what has got investors most excited. The Chemist Warehouse Tmall store is the largest in the world by gross merchandise volume. In 2018 during 'Singles day' the store sold over RMB 180 million (A$38 million) worth of products in just 24 hours.

The second key announcement related to the completion of its Australia Deloraine Dairy acquisition and the $31.44million placement to C2 Capital Partners.

Management believes this acquisition leaves Bubs Australia well placed to advance its vision to be a leading player in the infant milk formula and infant nutritionals markets both at home and in China.

Should you invest?

I agree that Bubs Australia is exceptionally well placed now to challenge the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) in the massive China market.

The big question, though, is whether there will be sufficient demand for its products in the crowded market to justify its market capitalisation of ~$400 million.

Because of this, I'm going to watch on from the safety of the sidelines and see how its sales growth fares in FY 2020 before considering an investment.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Bellamy's Australia and BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insightsmakes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Record Highs

a man wearing a gold shirt smiles widely as he is engulfed in a shower of gold confetti falling from the sky. representing a new gold discovery by ASX mining share OzAurum Resources
ETFs

7 hugely popular ASX ETFs smashing new record highs on Wednesday

Do you own any of these lucky ASX ETFs?

Read more »

Man smiling at a laptop because of a rising share price.
Record Highs

This ASX 200 share is breaking records amid a massive $300 million investment

This ASX 200 share made a triumphant return to trading today.

Read more »

A woman on holiday stands with her arms outstretched joyously in an aeroplane cabin.
Travel Shares

Big ASX news: Qantas share price hits record high

Qantas is defying the market to fly to new heights this Wednesday...

Read more »

Three Archer Materials scientists wearing white coats and blue gloves dance together in their lab after making a discovery
Record Highs

Superstar ASX 200 healthcare stock snags record high amid $32 million deal

The second multi-million-dollar deal in less than two weeks.

Read more »

ETF written in gold with dollar signs on coin.
ETFs

5 popular ASX ETFs smashing new record highs today

Do you own any of these high-flying funds?

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Record Highs

Boom! The ASX 200 just rocketed to new all-time highs

ASX 200 investors just sent the benchmark into uncharted territory.

Read more »

A US flag behind a graph, indicating investment in US shares
Record Highs

S&P 500 cracks another new record high: Can US stocks keep charging higher?

Investors just sent the S&P 500 to a new all-time high. Now what?

Read more »

Man smiling at a laptop because of a rising share price.
Index investing

Should you buy the Vanguard MSCI Index International Shares ETF (VGS) at all-time ASX highs?

Is it too late to buy this index fund?

Read more »