The A2 Milk Company Ltd (ASX: A2M) share price has been a very poor performer over the last 12 months.
Since this time last year, the struggling infant formula company's shares have lost 40% of their value.
This means the A2 Milk share price is now down by over 70% since the middle of 2020.
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Is the weakness in the A2 Milk share price a buying opportunity?
Opinion remains largely divided on the A2 Milk share price. However, one broker that is brave enough to recommend the embattled company as a buy is Bell Potter.
According to a recent note, the broker has a buy rating and $7.70 price target on the company's shares.
Based on the current A2 Milk share price of $5.38, this implies potential upside of 43% for investors over the next 12 months.
What did the broker say?
Bell Potter saw enough positives in A2 Milk's half year results last month to remain positive on the company.
It commented: "Our Buy rating remains unchanged. We saw plenty to like in this result: (1) growth in stage 1 market share in the MBS [mother and baby store] channel from 2.1% to 2.5% (indicative of new customer recruitment); (2) a beat in China direct channels sales in 1H22 and a closer alignment of sell-in and sell-out levels in 2Q22; (3) reinvestment of outperformance into marketing, to support FY23-24e revenue growth; and (4) progress on articulating a margin capture strategy at MVM."
Importantly, Bell Potter has not made any material changes to its earnings estimates following its results. It continues to expect the company's underlying net profit to be double FY 2021's levels in FY 2024.
Based on this, the broker estimates that the A2 Milk share price currently trades at approximately 28x FY 2024 earnings. While this is not conventionally cheap, Bell Potter appears to believe it deserves to trade at this level.
