Here’s why the A2 Milk share price is defying the market selloff on Friday

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.

The A2 Milk Company Ltd (ASX: A2M) share price is defying the market selloff on Friday.

In morning trade, the struggling infant formula company’s shares are up 2.5% to $4.11.

Why is the A2 Milk share price rising today?

Investors have been bidding the A2 Milk share price higher today for a couple of reasons.

One is an update out of smaller rival Bubs Australia Ltd (ASX: BUB), which revealed strong sales growth in the second half. Though, this is predominantly being driven by its deal with the US government, which A2 Milk is not party to.

What else?

Another catalyst for the rise in the A2 Milk share price could be news that the Abbott Laboratories infant formula manufacturing plant in Michigan has shut down just a couple weeks after resuming production.

On this occasion, Abbott Laboratories was forced to close the plant due to flooding following inclement weather. Abbott commented:

Abbott has stopped production of its EleCare specialty formula that was underway to assess damage caused by the storm and clean and re-sanitize the plant. We have informed FDA and will conduct comprehensive testing in conjunction with the independent third party to ensure the plant is safe to resume production. This will likely delay production and distribution of new product for a few weeks.

This appears to have sparked hopes that the US government will come knocking on A2 Milk’s door for addition supply. Though, it is worth noting that Abbott’s manufacturing was going strong prior to this latest shutdown. It explained:

Abbott will have produced 8.7 million pounds of infant formula in June for the U.S., or the equivalent of 168.2 million 6 oz. feedings. This is 95% of what we produced in January, prior to the recall and does not include production from Sturgis.

Time will tell if A2 Milk benefits from this crisis.

The post Here’s why the A2 Milk share price is defying the market selloff on Friday appeared first on The Motley Fool Australia.

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

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