Bubs share price rockets 77% on US deal with Biden Administration

Bubs shares have started the week very strongly…

| More on:
A girl wearing a homemade rocket launches through the stars.

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

Key points

  • Bubs has signed a deal with the US Government for 1.25 million tins of infant formula
  • This is to support the US through a shortage of the product
  • Bubs doesn't expect any disruption to current supply arrangement from the deal

The Bubs Australia Ltd (ASX: BUB) share price is rocketing higher on Monday morning.

At the the open, the infant formula company's shares are up a whopping 77% to a 52-week high of 86 cents.

Why is the Bubs share price rocketing higher?

Investors have been bidding the Bubs share price higher today after the company announced a major deal with the United States.

According to the release, Bubs will ship more than 1.25 million tins of baby formula to help ease a nationwide shortage. This shortage has been caused by a major product recall and the closure of a plant operated by Abbott Nutrition in response to rare bacterial infections.

This looks set to be a major boost to Bubs' financial performance, which has seen the company report significant cash burn for years. And with US President Joe Biden tweeting his thanks to Bubs, it arguably gives the company the biggest publicity it will ever receive.

What now?

The release notes that the shipment of 1.25 million tins is the equivalent of at least 27.5 million bottles and will comprise both cow's milk and goat's milk infant formula.

500,000 tins are ready for immediate export, with the remaining 750,000 tins now under production and planned to be completed in the coming months.

Bubs also revealed that it is well-placed to triple its current 10 million tin annual capacity at its FDA registered production facility if demand continues to build once the shortages end.

Importantly, in the meantime, the company has stressed that its supply to existing Australian retailers and export markets will remain unchanged despite its deal with the Biden Administration.

Management commentary

Bubs CEO, Kristy Carr, commented:

Bubs is uniquely positioned with an existing nationwide sales and distribution footprint, enabling us to stock shelves with existing and prospective retail partners quickly.

Bubs already has the necessary customer relationships and processes to support the initiative, including supply and distribution logistics, and the appropriate insurances and Aussie Bubs Advisory Board to assist American families. This foundation is a reflection of our long-term commitment to the USA as a strategic priority for the Company, drawing on our 17 years of experience in infant nutrition to ensure that stringent standards and quality control measures were in place to support the launch.

Bubs' chairman, Dennis Lin, acknowledged that the company was fortunate to have entered the USA market during a period of shortages.

Bubs had identified USA as a strategic key market two years ago, and our commitment to invest has thankfully coincided with American families' time of need. This allows us to accelerate our strategic vision as well as provide support that goes to the heart of the Bubs DNA.

Time will tell whether this is a short term boost to sales or the start of something special in the US market.

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 BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

a fashionable older woman walks side by side with a stylish younger woman in a street setting as they both smile at something they are talking about.
Consumer Staples & Discretionary Shares

This consumer discretionary share is up 40% in a year and set to keep rising

After a solid 12 months this broker thinks there’s room for more.

Read more »

Two couples having fun racing electric dodgem cars around a track
Broker Notes

4 ASX All Ords automotive stocks to buy today: expert

The broker expects a robust outlook for the automotive sector.

Read more »

young lady checking her social media accounts with floating emoji reactions and smiling
Earnings Results

News Corp share price charges higher on strong FY25 earnings growth

Let's see what the media giant reported for FY 2025.

Read more »

Couple look at a bottle of wine while trying to decide what to buy.
Dividend Investing

Why this beaten-down ASX 200 dividend stock could be set to rebound

A leading expert gives his verdict on the “appealing income” on tap from this ASX 200 dividend stock.

Read more »

A woman smiles over the top of multiple shopping bags she is holding in both hands up near her face.
Consumer Staples & Discretionary Shares

Unveiled: FY25 reporting dates for 10 ASX 200 retail stocks

Aussie retailers due to reveal their results.

Read more »

A couple in a supermarket laugh as they discuss which fruits and vegetables to buy
Consumer Staples & Discretionary Shares

1 ASX consumer staples stock to buy instead of Coles or Woolworths shares

This ASX consumer staples stock has doubled since October 2023.

Read more »

Happy man on a supermarket trolley full of groceries with a woman standing beside him.
Share Market News

Reporting dates for 7 ASX 200 consumer staples stocks including Woolworths

Key dates for the calendar.

Read more »

A man stands with his arms folded in front of banks of unused poker machines in a darkened gaming room.
Share Market News

Macquarie tips 26% upside for this ASX 200 gaming stock

Here’s what's behind this enticing price target 

Read more »