Why is the A2 Milk share price surging 5% on Tuesday?

The A2 Milk Company Ltd (ASX: A2M) share price is having a strong day.

In afternoon trade, the infant formula company’s shares are up 5% to $5.78.

Why is the A2 Milk share price rising?

The A2 Milk share price is rising today despite there being no news out of the company.

However, the consumer staples sector is performing very positively today and playing a role in keeping the ASX 200 index in positive territory.

In addition, a big announcement last week is likely to have given investor sentiment a boost and could be supporting the A2 Milk share price this week.

That announcement revealed that the company has received FDA approval to import, sell, and distribute products in the US market. Management estimates that it will ship 1 million cans of infant formula to the country during the second half. This will support a US market which has been facing shortages this year.

A2 Milk Company’s managing director and CEO, David Bortolussi, commented:

We are increasing our supply to respond to this situation, while importantly ensuring that we continue to meet the needs of our other IMF consumers and trade partners in China and other markets. If the US requires further support over an extended period, we have the proven ability to scale up significantly.

In response to the news, Bell Potter  retained its buy rating and lifted its price target slightly to $6.80. This implies potential upside of almost 18% for investors even after today’s strong gain.

The post Why is the A2 Milk share price surging 5% on Tuesday? 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. 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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