Broker says A2 Milk share price can keep rising

The A2 Milk Company Ltd (ASX: A2M) share price has been a strong performer this week.

Over the first two trading sessions, the infant formula company’s shares have stormed 16% higher.

This has been driven by the release of a stronger than expected full year result on Monday.

Can the A2 Milk share price keep rising?

The good news for shareholders is that one leading broker still sees scope for the A2 Milk share price to rise further from here.

According to a note out of Bell Potter, its analysts have upgraded the company’s shares to a buy rating and lifted the price target on them by a third to $6.35.

Based on the current A2 Milk share price of $5.73, this implies potential upside of almost 11% over the next 12 months.

What did the broker say?

Bell Potter was impressed with A2 Milk’s performance in FY 2022, noting that its result came in ahead of expectations.

The broker was also pleased with the company’s outlook commentary, which again was ahead of its expectations and has led to the broker upgrading its net profit after tax forecasts by 15% in FY 2023 and 16% in FY 2024.

Pleasingly, its analysts also see potential for this strong earnings growth to continue through to FY 2026. Bell Potter concluded:

We upgrade our rating from Hold to Buy. If A2M can execute on its strategy to achieve ~NZ$2Bn in FY26e revenues and EBITDA margins in the teens, then it would imply compound double digit EPS growth through to FY26e. Exiting the US, transitioning MVM towards nutritionals or execution of buybacks could accelerate this growth trajectory. Recent easing in dairy (notably SMP) and vegetable oil ingredient forward rates also imply the scope for favourable COGS movements in FY24e.

The post Broker says A2 Milk share price can keep rising appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Here are the top 10 ASX 200 shares today
• Why A2 Milk, Deep Yellow, Healius, and IGO shares are racing higher
• Are A2 Milk shares ‘turning a corner’ on the daigou debacle?
• Here are the top 10 ASX 200 shares today
• Why A2 Milk, Lovisa, McMillan Shakespeare, and Tyro are storming higher

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 Scott Phillips.

from The Motley Fool Australia https://ift.tt/aTtry2v