The A2 Milk Company Ltd (ASX: A2M) share price has been on a tumultuous ride these past 12 months, sliding 17% in that time.
Downward trends have prevailed this year to date as well with the dairy nutrition company’s shares down by 19%.
But one broker is taking a glass-half-full approach to the future of A2 Milk.
Broker weighs in on A2 Milk share price
Purveyors of infant formula in the US have been biting their nails since February after one of the largest domestic manufacturers made large recalls on its product line.
Abbott Laboratories was forced to immediately shut a manufacturing facility after it discovered bacteria on the site, while simultaneously recalling shelved product and inventory from the market.
The result has been a dramatic wind back in the domestic production of infant formula in the US, resulting in a dislocation between demand and supply.
For these reasons analysts at investment bank Citi are flagging a potential entry into the US market for A2 Milk – something the company has been trying to secure for years.
Previously, Citi says, the US infant formula market has been ring-fenced from outside entrants such as A2 Milk, but that could all be set to change amid the latest challenges.
In a recent note, Citi analysts covered both BUBS Australia Ltd (ASX: BUB) and A2 Milk and reckon both are well positioned to take on a US entry.
As a result, the investment bank revised its targets upwards for the A2 Milk share price, lifting its rating from a sell to neutral in the process.
With that, it values the company at $4.64 per share, well behind the consensus price target of $5.83 apiece, according to Bloomberg data.
From this list of analysts, per Bloomberg, roughly 27% say to buy A2 Milk, whereas 60% say it’s a hold right now. The remaining coverage urges clients to sell their positions in the company.
At the time of writing, the A2 Milk share price is down 0.68% today at $4.38.
The post Low on milk? Fear not, here’s why Citi is bullish on the A2 Milk share price appeared first on The Motley Fool Australia.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow 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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