The Bubs Australia Ltd (ASX: BUB) share price came under pressure on Tuesday.
The infant formula companyâs shares tumbled 5% to end the day at 57.5 cents.
Investors were selling down Bubsâ shares in response to the release of its full year results.
Where next for the Bubs share price?
One leading broker that believes the Bubs share price is heading higher from here is Bell Potter.
According to a note this morning, the broker has upgraded the companyâs shares to a speculative buy rating with an improved price target of 80 cents.
Based on the latest Bubs share price, this implies potential upside of 39% for investors over the next 12 months.
Why is Bell Potter bullish?
Bell Potterâs upgrade has less to do with the company’s results and more to do with the future.
It feels that Bubs has an opportunity to fill a void left by A2 Milk Company Ltd (ASX: A2M) following its shift of focus in China. If everything goes to plan, the broker suspects that Bubs could grow its gross revenue from $104.2 million in FY 2022 to over $400 million by FY 2026.
The broker explained:
We upgrade our rating from Hold, Speculative risk to Buy, Speculative risk. The rapid conscious shift in A2Mâs sales mix towards China direct (PRC + CBEC) in our view creates a void in the supply of IMF product to large domestic Daigou buyers in a similar vein to when Danone undertook a similar strategy in 2HCY18. We expect BUB to be a beneficiary of this move given its domestic channel partners. Longer-term we see BUB as a high ceiling IMF play, with the scope to be a >$400m gross revenue business by FY26e if successful in executing its US and China growth strategies.
The post Why Bell Potter is tipping 40% upside for the Bubs share price appeared first on The Motley Fool Australia.
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More reading
- Why Bravura, Bubs, Grange, and Sandfire shares are sinking
- Why is the Bubs share price down 4% after reporting strong FY22 growth?
- Bubs share price on watch as full-year revenue blasts 127% 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 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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