The A2 Milk Company Ltd (ASX: A2M) share price is pushing higher on Tuesday.
In afternoon trade, the fresh milk and infant formula company’s shares are up 1% to $5.92.
Why is the a2 Milk share price rising today?
The rise in the a2 Milk share price today may have been driven by a broker note out of Bell Potter.
According to the note, the broker has retained its buy rating and $8.50 price target on the company’s shares.
Based on the latest a2 Milk share price, this implies potential upside of 45% over the next 12 months.
What did Bell Potter say?
Bell Potter has been looking at a number of monthly activity points that it uses to judge how the company could be performing.
One of those is Chinese infant milk formula (IMF) imports. While the broker notes that volumes are still down significantly year on year, it believes they have bottomed now.
It said: “The largest exporters of IMF to China are the EU, NZ and Australia. We view movements in volumes to China from these markets as indicative of overall market dynamics, with the R3M average removing monthly noise. While volumes continue to demonstrate double digit YOY declines (-23% YOY in May’21), sequentially volumes look to have formed a bottom in recent months, up +29% from Jan’21 lows.”
What should you look for with a2 Milk’s results?
With the company’s full year result just around the corner, Bell Potter also spoke a little about what could move the a2 Milk share price when it releases its numbers.
The broker explained: “The key focuses of the FY21e result will be the extent to which inventory impairments, volume swaps and sales delays have impacted headline EBITDA. In total we estimate NRI’s [non-recurring items] to be taken above the line total NZ$110-150m, with an additional NZ$30m impact from 4Q21 sales slowdown to reduce channel stocks. Incorporating MVM and recent currency movements would indicate FY22e baseline EBITDA closer to NZ$250- 340m, which compares to a FY22e consensus of NZ$264m. In our view consensus FY22e EBITDA expectations are on the low side.”
The a2 Milk share price is down 50% in 2021.
The post a2 Milk (ASX:A2M) share price rises on bullish broker note appeared first on The Motley Fool Australia.
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More reading
- Here’s why the A2 Milk (ASX:A2M) share price is down 18% in a month
- These are the 10 most shorted ASX shares
- Top brokers name 3 ASX shares to sell next week
- Is it a good time to buy A2 Milk (ASX:A2M) shares in August 2021?
- The A2 Milk share price is down 7% this last week. Here’s why
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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