Is the a2 Milk (ASX:A2M) share price a bargain buy?

Is this beaten down former market darling in the buy zone?

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The A2 Milk Company Ltd (ASX: A2M) share price has been an exceptionally poor performer in 2021.

Since the start of the year, the fresh milk and infant formula company's shares have crashed 47% lower.

This follows the further deterioration in the company's performance, which led to management downgrading its earnings guidance for a fourth time during the financial year.

Is the worst over for the a2 Milk share price?

One leading broker that appears to believe the worst is behind the a2 Milk share price now is Bell Potter.

According to a recent note, the broker has put a buy rating and $8.50 price target on the company's shares. Based on the a2 Milk share price of $6.11, this implies potential upside of 39% over the next 12 months.

What did the broker say?

Bell Potter appears to believe that investors should look beyond the company's short term headwinds and focus on its long term potential. Particularly given its opportunity to expand its offline footprint in the lucrative China market.

The broker explained: "At its core we see A2M as a business that, once MVM [Mataura Valley Milk] is consolidated, has baseline revenue of ~NZ$1.4-1.5Bn and EBITDA of ~NZ$300m, with a pathway to being a ~NZ$1.7Bn revenue business generating ~NZ$445m in EBITDA on its existing China offline distribution footprint (with a materially higher portion of direct China sales than in the past)."

"Expansion in China offline distribution points towards ~30k, could see A2M lift to a ~NZ$2bn top line business generating ~NZ$560m in EBITDA. As such we do not see FY21e revenue or earnings as reflective of where the business will operate once supply chains have stabilised and retain our Buy rating," it added.

In light of this, the abject performance of the a2 Milk share price in 2021 could potentially be a buying opportunity for brave investors.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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