The Baby Bunting Group Ltd (ASX: BBN) share price was among the best performers on the All Ordinaries index on Tuesday.
The baby products retailer’s shares ended the day with a gain of 4% to $5.50.
This latest gain means Baby Bunting’s shares are now up 24% since this time last year.
Why did the Baby Bunting share price storm higher today?
Investors were bidding Baby Bunting’s shares higher on Tuesday after it was the subject of a bullish broker note out of Citi.
According to the note, the broker has upgraded the retailer’s shares to a buy rating with an improved price target of $5.98.
Based on the current Baby Bunting share price, this implies potential upside of approximately 9% over the next 12 months.
And with Citi forecasting a 17 cents per share fully franked dividend in FY 2022, the potential return stretches to almost 12%.
What did the broker say?
Citi made the upgrade largely on valuation grounds. The broker notes that the Baby Bunting share price has pulled back meaningfully since the release of its full year results for FY 2021 in August.
It sees this as a buying opportunity. Particularly given its belief that the retailer is well-placed for growth. In addition, Citi is expecting a decent trading update at its annual general meeting in October.
Citi commented: “We upgrade to Buy as we now see the risk/reward tradeoff to be more favourable following the -12% share price decline since the FY21 result. The company’s core growth strategies of rollout, exclusive/private label growth and supply chain efficiencies remain intact.”
“Further, Baby Bunting is well placed to report a relatively stronger AGM trading update compared to most listed retail peers given the nondiscretionary nature of its products,” the broker concluded.
The post Baby Bunting (ASX:BBN) share price surges higher on broker upgrade appeared first on The Motley Fool Australia.
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More reading
- Why Atlas Arteria, Baby Bunting, De Grey Mining, & New Hope are pushing higher
- 2 strong ASX retail shares that could be buys
- 2 ASX growth shares that could be buys in September 2021
- What has happened to the Baby Bunting (ASX:BBN) share price this year?
- Top brokers name 3 ASX shares to buy next week
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 Baby Bunting. 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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