A2 Milk Company Ltd (ASX: A2M) shares are having a positive session on Thursday.
In morning trade, the infant formula company's shares are up 0.5% to $4.22.
However, that doesn't change much on a year to date basis.
As things stand, A2 Milk shares are on course to record a decline of 38% for 2023.
Will things be better for A2 Milk shares in 2024?
The good news for investors is that a number of brokers believe that the company's shares can rise meaningfully from current levels over the next 12 months.
For example, Bell Potter may only have a hold rating on its shares, but its price target of $4.85 implies a potential upside of 16%.
Over at Citi, its analysts have a buy rating and a $4.74 price target, which suggests that A2 Milk shares could rise 13% from where they trade today.
The team at Morgans is even more bullish. Its analysts currently have an add rating and a $5.40 price target on its shares. If they were to rise to this level, it would mean a gain of almost 30% for investors.
Morgans recently commented:
Given A2M is trading on its lowest multiples in years, it has a strong brand, balance sheet and management team and there is 26.5% [now ~30%] upside to our new valuation of $5.40, we upgrade to an Add rating.
What to look for in 2024
The main drag on A2 Milk's shares has been its performance in China.
Changing consumer preferences, new standards, and its slowing birth rate have made it a difficult market to operate in.
Investors may want to keep an eye on its performance in the key market when A2 Milk releases its half-year results in February.
Though, it is worth highlighting that expectations are low. The bulls at Morgans are more focused on what could happen in FY 2025 and FY 2026, rather than next year. They commented:
[G]iven FY24 is a transition year for CL IF [Chinese label infant formula] under the new GB standards, guidance was rightly conservative and has resulted in material earnings downgrades. While near term earnings uncertainty exists, we believe that decent growth should resume in FY25 and FY26.
If the company demonstrates that this will be the case, then A2 Milk shares could rally next year in anticipation of this future growth.
