Why is the A2 Milk (ASX:A2M) share price leaping again today?

It's nothing but green pastures for A2 Milk shares today…

| More on:
A cow leaps into air in front of a cloudy sky.

Image source: Getty Images

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 A2 Milk Company Ltd (ASX: A2M) share price is continuing its ascension on the back of yesterday's 13.3% rally.

At the time of writing, the fresh milk and infant formula producer's shares are up 3.57% to $6.81 apiece. However, earlier in the day they were changing hands for as much as $7.23, a gain of almost 10% on yesterday's closing price.

Today's strong performance puts the company's shares at a 3-month high. However, on paper shareholders are still carrying a heavy 53% loss over the past year.

The question is: what recent events have led to this share price rejuvenation?

Positive signs for sales channel

Investors are turning the A2 Milk share price greener than dairy cow pastures today. This comes amid renewed optimism for the company's all-important daigou sales channel. This is likely being influenced by two different factors.

Firstly, the $4.32 billion specialty milk has gained gusto on the back of yesterday's quarterly update by Bubs Australia Ltd (ASX: BUB). The smaller alternative infant formula company revealed a stellar quarter, with revenue surging 45% from the previous quarter.

Importantly, Bubs reported a 156% year-on-year resurgence in its Chinese business. Additionally, sales through the daigou channel increased 6.5 times from the prior year. As a result, investors are looking at the potential return of a critical revenue source for A2 Milk.

Secondly, earlier in October, Australian authorities approved international students vaccinated with Sinovac entry into Australia. This move indicates the potential resumption of Chinese nationals entering Australia and sending infant formula back home.

What analysts think of the A2 Milk share price

While the latest news suggests there is light at the end of the tunnel for A2 Milk, analysts at Credit Suisse prefer other opportunities. The broker maintains a price target of $5.50, indicating negative performance to come.

However, analysts at Citi have taken the other side of the fence on the A2 Milk share price. Presently, the broker holds a $7.20 price target on the milk maker. Behind this optimistic outlook is the belief that demand for the company's products will improve.

Motley Fool contributor Mitchell Lawler 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 and BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

Photo of a happy couple with their new car and car keys.
Consumer Staples & Discretionary Shares

Up 55% this year, why Macquarie believes Eagers Automotive shares can charge higher

Eagers set to capitalise as BYD’s Australian sales surge.

Read more »

Two race cars on a track at sunset.
Consumer Staples & Discretionary Shares

Down 36% in a year, this ASX 300 stock is one to watch

After a major sell-off, this high-performance cooling specialist might be gearing up for a turnaround.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

person with large headphones looking puzzled holding their hand to their chin.
Broker Notes

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Both companies have market-beating long-term track records.

Read more »

Person taking out a slice of pizza from a pizza box.
Consumer Staples & Discretionary Shares

Why now is the time to buy the big dip on Domino's shares

Down 46% in a year, a leading expert forecasts brighter days ahead for Domino’s shares.

Read more »

Three people sit on safe cheering with pizza on table
Consumer Staples & Discretionary Shares

Food fight! Have Guzman Y Gomez shares outperformed Domino's since ASX debut?

Lets find out who’s topping the menu for investors

Read more »

Woman chooses vegetables for dinner, smiling and looking at camera.
Consumer Staples & Discretionary Shares

Here's the Coles dividend forecast from top analysts through to 2029

Can this defensive business provide pleasing payouts? Let’s take a look…

Read more »