The Bubs share price dropped 11.5% lower today

The Bubs Australia Ltd (ASX:BUB) share price has dropped notably lower today. Here's what you need to know…

| 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

The Bubs Australia Ltd (ASX: BUB) share price has had a disappointing start to the week.

The infant formula and baby food company's shares fell as much as 11.5% to $1.25 this afternoon.

They have since rebounded a touch but are still down 9.5% to $1.28 at the time of writing.

Why did the Bubs share price drop 11.5% lower today?

With no news out of the company or broker notes that I'm aware of, today's decline appears to be a case of profit taking from some investors following an impressive share price rally in 2019.

Prior to today, the Bubs share price had gained a remarkable 208% since the start of the year, making it the third-best performer on the All Ordinaries index behind medical technology company Avita Medical Ltd (ASX: AVH) and payments company Zip Co Ltd (ASX: Z1P).

Why has the Bubs share price been on fire in 2019?

Bubs has caught the eye of investors this year following a series of announcements, many of which have been made in recent weeks.

One key announcement was the acquisition of Australia Deloraine Dairy for $35 million in cash and shares. Australia Deloraine Dairy is a CNCA approved infant formula manufacturing facility.

According to the company's CEO and founder, Kristy Carr, the acquisition is expected to lead to a material reduction in production costs, as well as placing Bubs in the best possible position to achieve SAMR brand registration.

The latter will allow the company to export its infant formula products to China to be sold in physical Mother and Baby stores alongside A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL).

Another key announcement was an 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 due to commence in June and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and Tmall online stores.

And finally, the recent announcement of the company's expansion into cow milk infant formula also drove its share price higher.

Bubs expanded into cow milk infant formula after entering into a supply agreement with Fonterra Australia (ASX: FSF) to produce Bubs Organic new infant formula range. This agreement will make Bubs the first company to offer Australian made certified organic grass-fed cow milk infant formula.

Management advised that the new product range is expected to be available in Chemist Warehouse pharmacies across Australia within three months. After which, the company plans to make it available for export through China's cross-border eCommerce channel.

Kristy Carr believes this product has a lot of potential. She said: "Cow milk formula accounts for close to 95 percent of the Australian formula market and represents a significant opportunity for Bubs, which already has both a premium Australian infant nutrition brand positioning and strong organic credentials established over 13 years producing Bubs Organic baby food portfolio."

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 Share Fallers

A worried man holds his head and look at his computer.
Share Fallers

Why Graincorp, Light & Wonder, Orica, and Wildcat shares are falling today

These shares are having a tough time on Thursday. But why?

Read more »

A man with his back to the camera holds his hands to his head as he looks to a jagged red line trending sharply downward representing the ASX tech share sell-off today
Share Fallers

Why Insignia, Light & Wonder, Mineral Resources, and Nuix shares are sinking today

These shares are having a difficult time on hump day. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Endeavour, Global Data Centre, OFX, and Paladin Energy shares are dropping today

Why are these shares under pressure today? Let's find out.

Read more »

A man sits wide-eyed at a desk with a laptop open and holds one hand to his forehead with an extremely worried look on his face as he reads news of the Bitcoin price falling today on his mobile phone
Share Fallers

ASX 200 uranium stock alert: Paladin Energy shares just crashed 29%!

Paladin Energy shares are under intense selling pressure on Tuesday.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Champion Iron, Endeavour, Infomedia, and Resolute Mining shares are sinking today

These shares are starting the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Arcadium Lithium, Block, Jumbo, and Mineral Resources shares

These shares are ending the week in the red. Why are investors selling them?

Read more »

A woman with short brown hair and wearing a yellow top looks at the camera with a puzzled and shocked look on her face as the Westpac share price goes down for no reason today
Share Fallers

Why Clearview, NAB, Resolute Mining, and Westpac shares are dropping today

These shares are under pressure today. But why?

Read more »

A man looking at his laptop and thinking.
Bank Shares

Why is the Bendigo Bank share price tanking today?

There are a few things that could be driving this bank lower today.

Read more »