Commonwealth Bank of Australia (ASX: CBA) shares are back on form on Friday.

In afternoon trade, the banking giant’s shares are up almost 1% to $102.38.

Though, that doesn’t take away from the fact that CBA’s shares are still down over 8% from the 52-week high they reached this month.

This weakness has been driven by the release of the bank’s half year results, which appeared to indicate that its net interest margin (NIM) has peaked well ahead of expectations.

Are CBA shares in the buy zone now?

Analysts at Morgans have been looking over CBA’s half year result and have given their verdict. The broker said:

The 1H23 result was solid, with strong operating profit growth partly offset by the reversal of credit impairment releases into expensing. Cash returns were lifted via higher dividends and buybacks. The key negative was the seemingly early peak in the NIM and concerns for a weakening domestic economy and mortgagor.

In light of this, the broker has not seen enough to change its recommendation and has reaffirmed its hold rating with a $96.11 price target. This implies potential downside of 6.1% for CBA’s shares over the next 12 months.

Though, this is partly offset by Morgans’ forecast of a $4.50 per share fully franked dividend in FY 2023. This equates to a 4.4% dividend yield at current prices.

Shares do ‘not look cheap’

Overall, the broker is a fan of CBA but would rather pick up shares at a cheaper level. It concludes:

While our valuation has increased and the share price has fallen from recent all-time highs, the stock still does not look cheap on either DCF or historical trading multiple ranges. For income investors, CBA’s current forward cash yield of c.4.4% now looks compressed vs deposit rates.

Furthermore, there is potentially more downside risk if we are at peak earnings and the narrative is cyclically changing away from NIM expansion to cost growth (including normalising credit impairment expense) and risks to asset quality. CBA remains a core long term portfolio holding, and is the highest quality major bank, but its short term investment performance may be limited.

The post CBA shares ‘do not look cheap’ despite recent selloff: broker appeared first on The Motley Fool Australia.

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More reading

• Passive income watch: 3 ASX 200 shares that announced boosted dividends this week
• Is the CBA share price a buy following Wednesday’s 5% fall?
• Earnings preview: Here are the ASX shares reporting on Thursday
• 5 things to watch on the ASX 200 on Thursday
• Will ASX 200 shares crash in 2023?

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 no position in any of the stocks mentioned. 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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The Santos Ltd (ASX: STO) share price is down 1.3% in early afternoon trading. 

The S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $7.01 per share with shares currently trading for $6.92 apiece.

That’s largely in line with the wider market, with the S&P/ASX 200 Energy Index (ASX: XEJ) down 1.2% at this same time.

The Santos share price appears resilient today, despite media reports the oil company deceived the public about the severity of an offshore oil spill last March.

What allegations were levelled?

As The Sydney Morning Herald reports, Santos was responsible for some 25,000 litres of oil spilling into the sea off Western Australia’s Pilbara coast in March 2022.

Santos did not publicly report on the spill at the time.

When the SMH reported on the incident in April, a Santos spokeswoman reportedly called it a “minor spill” with a “negligible” impact on the environment.

But in a fresh development, which has yet to have a material impact on the Santos share price, an anonymous whistleblower said the oil slick caused the deaths of numerous marine animals, including dolphins.

The informant’s statement was heard at a Senate committee yesterday.

“Tens of thousands of litres of oil in the ocean, dead dolphins and sea snakes. How was this negligible?” they said.

“I felt strongly that Santos’ comment was baseless, designed to mislead and avoid accountability,” they added, noting that the company didn’t send experts to the site until a week following the mishap.

At the time of writing, Santos has not yet responded to the allegations.

Santos share price snapshot

As you can see in the chart below, the Santos share price is down 2% over the past 12 months.

Longer-term shares in the ASX 200 oil company are up 35% over five years.

At the current price, Santos has a market cap of approximately $23 billion.

The post Santos share price edges lower amid allegations of disastrous deception appeared first on The Motley Fool Australia.

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• ‘Attractive opportunities’: Fund reveals why 2 ASX 200 shares are its biggest holdings
• Power up your passive income with these high yield ASX dividend shares: expert
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Why is the Santos share price lifting on Tuesday?

Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. 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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Reporting season is now in full swing. Certainly, there has been some impressive dividend growth revealed this week by S&P/ASX 200 Index (ASX: XJO) shares.

After such a strong period for a number of industries through the COVID-19 period, FY23 is a new phase, with high interest rates and higher costs.

But, some businesses are managing to deliver higher profits and dividends for investors. These are the increases from some of the biggest blue-chip ASX 200 shares.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is the owner of businesses like Bunnings, Kmart, and Officeworks. Each of those businesses reported an increase in earnings before tax (EBT).

As a whole, Wesfarmers reported that revenue (excluding Wesfarmers Health) saw 11.4% revenue growth, with net profit after tax (NPAT) growth of 14.1% to $1.38 billion. Earnings per share (EPS) grew by 14% to $1.22.

That profit growth enabled the ASX 200 share to grow its dividend by 10% to 88 cents per share.

It also said that retail trading results in the first five weeks of the FY23 second half were “broadly in line with growth reported for the first half”.

Telstra Group Ltd (ASX: TLS)

Telstra was another business to report this week. Total income increased 6.4% to $11.6 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 11.4% to $3.9 billion, and EPS jumped 27.1% to 7.5 cents.

It continues to see growth in users in its mobile division.

The ASX 200 telco revealed a 6.3% increase in its dividend, equating to an 8.5 cents per share payment.

Telstra is benefiting from a combination of revenue increasing and cost-cutting. The telco is expecting EPS to keep growing as part of its T25 strategy, which is about increasing profit, being the 5G leader, and being a great workplace for employees.

In FY23, it’s expecting to generate underlying EBITDA of between $7.8 billion to $8 billion and free cash flow after lease payments of between $2.6 billion to $3.1 billion.

Commonwealth Bank of Australia (ASX: CBA)

CBA revealed a 9% increase in cash NPAT to $5.15 billion, while pre-provision profit jumped 18% to $7.82 billion. The net interest margin (NIM) improved to 2.10%, up 23 basis points (0.23%) from the FY23 second half.

This enabled the ASX 200 share to grow the interim dividend by 20% to $2.10 per share. This represented a dividend payout ratio of 69%.

CBA noted that households are feeling “significant strain” from interest rates, though consumer spending remains “resilient”. It also said that “the fundamentals of the economy remain solid, with low unemployment, strong exports and returning migration.”

The post Passive income watch: 3 ASX 200 shares that announced boosted dividends this week appeared first on The Motley Fool Australia.

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More reading

• Broker gives its verdict on the Telstra share price post-results
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today
• Why did the ASX 200 leap higher on rising unemployment data?
• Here are the 3 most heavily traded ASX 200 shares on Thursday

Motley Fool contributor Tristan Harrison 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 positions in and has recommended Telstra Group and Wesfarmers. 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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The Mineral Resources Ltd (ASX: MIN) share price is tumbling on Friday despite the company officially taking control of takeover target Norwest Energy NL (ASX: NWE).

The market is reacting poorly to today’s news with the Mineral Resources share price currently 1.23% lower at $85.60.

Meanwhile, the Norwest share price has slumped 2.26% to trade at 6.5 cents.

Let’s take a closer look at the latest from the S&P/ASX 200 Index (ASX: XJO)’s mammoth miner.

Mineral Resources share price plunges on takeover milestone

Major acquisition news appears to have failed to bolster market sentiment in Mineral Resources shares today.

The company revealed its voting power in Norwest surged to 53.86% on Thursday. That leaves it with control over the $425 million energy outfit.

The now-majority stakeholder offered one of its own shares for every 1,300 Norwest stocks held last month. The bid secured the approval of the takeover target’s board after a lower offer was rejected in December.  

That implied an offer price of 7.41 cents per share at the time. It also represented a 65% premium on the takeover target’s last undisturbed share price.  

Mineral Resources managing director and billionaire Chris Ellison has urged remaining Norwest shareholders to accept the offer, saying it’s a “no brainer”:

Those who don’t accept will be left behind in a MinRes-controlled company with none of the upside of being a MinRes shareholder or exposure to our world-class portfolio of diversified assets.

Those who fail to promptly accept our revised offer will also miss out on receiving our interim dividend and risk having their own share price and liquidity diminish – but will still have to shoulder the burden of their share of significant Perth Basin exploration and development risk.

Mineral Resources’ offer has been extended to 2 March on the milestone. It will be able to acquire all Norwest shares if its interest reaches 90%.

The ASX 200 mining giant is gearing up to release its earnings for the first half of financial year 2023 next Friday.

The post Mineral Resources share price slumps despite major Norwest takeover milestone appeared first on The Motley Fool Australia.

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• Why this US$1 trillion milestone matters for ASX 200 lithium shares
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• These ASX 200 shares are top picks in Macquarie’s growth portfolio

Motley Fool contributor Brooke Cooper 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 no position in any of the stocks mentioned. 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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Coles Group Ltd (ASX: COL) shares will be watched closely next week when the supermarket giant releases its half year results.

Ahead of the release, let’s look at what the market is expecting from the company on 21 February.

What is the market expecting from the Coles half year result?

According to a note out of Goldman Sachs, its analysts expect first half group sales of $21,354 million, up 3.7% over the prior corresponding period. This comprises supermarket sales of $18,729 million, liquor sales of $2,014 million, and convenience sales of $611 million.

However, unlike rival Woolworths Group Ltd (ASX: WOW), which is expected to deliver strong earnings growth, Goldman Sachs expects Coles to report a decline in profits. It is forecasting underlying net profit after tax of $542 million. This will be a 1.3% decline over the prior corresponding period and driven by margin contraction. The broker explained:

From a margin perspective, we also expect COL to see ~10bps EBIT margin contraction in 1H23 on the back of lower GPM and higher implementation cost for supply chain transformation including Witron and Ocado. This is in contrast to ~30bps EBIT margin expansion we expect for WOW. Net net, we are looking for flat EBIT growth YoY for COL vs. +11% for WOW in 1H23. We are ~3.6% below Visible Alpha consensus EBIT for 1H23.

And while Goldman hasn’t provided an interim dividend estimate, for the full year it is forecasting a 60.9 cents per share fully franked dividend. This will be down 1.1% year over year and could mean the interim dividend will be down by a similar percentage.

Finally, the broker has warned that if its forecasts are accurate, it could cause Coles shares to tumble. It concludes:

COL is currently trading at 23.3x FY24 P/E on vs. historical average of 21.6x, and is only at ~1x P/E discount vs. historical average of ~4x relative to WOW. We expect that a disappointment in 1H23 margins will result in stock underperformance.

The post Own Coles shares? Here’s what the market is expecting from its half year results appeared first on The Motley Fool Australia.

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• These are the growing ASX dividend shares to buy now: analysts
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• Get an income boost with these ASX dividend shares: broker
• With interest rates heading higher again, the risk is to the downside for these popular blue chip ASX shares
• 2 ASX stocks I’d buy in February for lifelong passive income

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 positions in and has recommended Coles Group. 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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ASX buy now, pay later (BNPL) shares are under selling pressure on Friday.

While the All Ordinaries Index (ASX: XAO) is also down 0.61% as we head into the lunch hour, the BNPL companies are faring significantly worse.

The pay-by-instalment industry looks to be under pressure after the Australian Securities and Investments Commission (ASIC) came out in support of stringent new regulatory proposals.

At the time of writing, here’s how these ASX BNPL shares are faring:

• Shares in Block Inc (ASX: SQ2), which acquired Afterpay in January last year, are down 7.62%
• Zip Co Ltd (ASX: ZIP) shares are down 3.33%
• Sezzle Inc (ASX: SZL) shares are down 3.8%

Here’s what’s happening.

What new rules is ASIC proposing?

ASX BNPL shares have been in limbo for some time now as to what types of lending standards they’ll be held to.

Treasury is considering three options in a bid to protect consumers from taking on too much debt.

Yesterday, ASIC came out in favour of the most stringent of those three alternative proposals.

Should the government adopt ASIC’s decision, ASX BNPL shares will be facing largely the same regulatory hurdles as credit card companies. That means they may need to dig into their customers’ financial health before opening a line of interest-free credit.

That could prove an onerous burden in the current environment of high inflation and rising interest rates.

According to the ASIC report (courtesy of The Australian Financial Review):

Products with similar characteristics and the same purpose and function should be treated the same way in the regulatory framework.

Uniform regulation under the National Credit Act would bring a more consistent regulatory framework across all buy now, pay later providers and a standardised regime that could be enforced by ASIC.

Commenting on the development putting ASX BNPL shares under pressure today, analysts at Moody’s Investors Service said (quoted by the AFR):

Regulation remains a continuing hurdle for fintechs In Australia, the once fast-growing BNPL sector is facing scrutiny as the government is considering a number of options to enhance the regulation of consumer credit.

More regulatory burdens will result for all BNPL providers, including Afterpay and Zip.

But no final decision has been made. Financial Services Minister Stephen Jones said the government was still working through the specifics of the pending regulations.

How have these ASX BNPL shares performed over a year?

With today’s falls factored in, the ASX BNPL shares listed above have sunk even deeper into the red.

Here’s how they’ve performed over the past 12 months:

The Block share price is down 24%:

The Zip share price is down 78%:

And the Sezzle share price is down 70%:

Whether buying these stocks at these prices represents grabbing a bargain or catching a falling knife remains to be seen.

With that said, should the government opt for a lighter regulatory approach, they could well enjoy a healthy bounce.

Stay tuned.

The post ASX BNPL shares deep in the red as ASIC turns up the regulatory heat appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
• Why did the ASX 200 leap higher on rising unemployment data?
• Why are ASX 200 tech stocks like Xero having such a cracking run today?
• Why is the Zip share price rocketing 7% today?
• Here are the 10 most shorted ASX shares

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block and Zip Co. The Motley Fool Australia has positions in and has recommended Block. 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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Earlier today, the Telstra Group Ltd (ASX: TLS) share price hit a new 52-week high of $4.24.

Investors have been buying the telco giant’s shares this week following the release of its half year results.

Telstra reported a result a touch ahead of expectations with its 6.4% increase in total income to $11.6 billion and 11.4% jump in EBITDA to $3.9 billion. This allowed the Telstra board to increase its fully franked interim dividend by 6.3% to 8.5 cents per share.

Can the Telstra share price keep rising?

The good news is one leading broker believes the Telstra share price can keep rising from here.

A note out of Morgans reveals that its analysts have retained their add rating with an improved price target of $4.70.

Based on the current Telstra share price of $4.22, this implies potential upside of over 11% for investors over the next 12 months.

In addition, Morgans is now expecting a 17 cents per share fully franked dividend in FY 2023. This equates to a 4% yield and boosts the total potential return beyond 15%.

What did the broker say?

Morgans was pleased with Telstra’s result and believes it is well-placed to deliver achieve its earnings guidance in FY 2023. It said:

Doubling 1H23 underlying EBITDA gets most of the way to the bottom end of the guidance range. Given the business has positive earnings momentum, guidance looks comfortably achievable, in our view.

And with the mobile market in good shape and potential asset divestments on the horizon, Morgans is positive on the future. It adds:

Telco has the strongest tailwinds in a decade with an increasingly rational market, price rises across the majors and the criticality of telco increasingly recognised. The last major mobile operator Vodafone/TPG increased mobile prices by ~$5 per month in January 2023 and all key players are behaving economically rational.

This combines with catalysts including the potential for InfraCo value release following the legal restructure. Add retained, TP increased to $4.70.

The post Broker gives its verdict on the Telstra share price post-results appeared first on The Motley Fool Australia.

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More reading

• Why Bapcor, Magellan, Sonic Healthcare, and Telstra shares are charging higher
• Everything you need to know about the boosted Telstra dividend
• Telstra share price higher on half-year revenue and earnings beat
• Telstra share price on watch amid strong half-year profit growth
• 5 things to watch on the ASX 200 on Thursday

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 positions in and has recommended Telstra Group. 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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The QBE Insurance Group Ltd (ASX: QBE) share price is off to the races today. 

Shares in the S&P/ASX 200 Index (ASX: XJO) insurance company closed yesterday trading for $13.40. Shares are currently changing hands for $14.69, up 9.6%.

This comes following the release of QBE’s full-year 2022 results (FY22).

Here’s what’s piquing ASX 200 investor interest on Friday morning.

QBE share price soars amid dividend growth

• Statutory net profit after tax (NPAT) of $770 million, up from $750 million in FY21
• Adjusted cash profit after tax increased 5.2% year on year to $847 million
• Adjusted cash return on equity of 10.5%, up from 10.3% the prior year
• Adjusted gross written premium of $20.1 billion, up 13% from FY21
• Declared a final, fully franked dividend of 30 cents per share, up 57% from the 19 cents per share paid out in FY21

What else happened during the year?

ASX 200 investors may also be bidding up the QBE share price today on the insurer’s continuing premium growth.

The company reported 13% gross written premium growth, driven by a 7.9% increase in its group-wide renewal rate.

In other action during the year, QBE entered into a broad-based reinsurance transaction with Enstar Group Limited (NASDAQ: ESGR). The company said this de-risks its exposure to reserves totalling around $1.9 billion. That transaction remains subject to regulatory approvals.

And the QBE share price doesn’t seem to be negatively impacted today by the rather poor performance of the company’s investment portfolio.

QBE reported a total investment loss in 2022 of $776 million, or a loss of 2.7%. In 2021 the investment portfolio returned a gain of 0.4% for a return of $122 million. QBE said unrealised losses associated with significant increases in bond yields over the year were responsible for much of those negative returns.

What did management say?

Commenting on the results sending the QBE share price rocketing today, CEO Andrew Horton said:

Our new purpose, vision and strategic priorities launched at the start of 2022 have been embraced by our people, helping to bring us together and become a more consistent organisation.

As we look forward, we have the right foundations in place, the right team and importantly, strong enterprise-wide engagement around a clear and consistent strategy…

2022 has been about laying the foundations and embedding our new vision, purpose and strategic priorities.

What’s next?

Looking ahead at what might impact the QBE share price down the road, the insurer expects 2023 constant currency gross written premium growth to be in the mid-to-high single digits.

QBE also flagged a significant expected improvement in its investment returns.

QBE share price snapshot

As you can see in the chart below, with today’s big intraday spike factored in, the QBE share price is up 16% over the past 12 months.

The post QBE share price leaps 10% amid explosive dividend growth appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Power up your passive income with these high yield ASX dividend shares: expert
• 10 ASX stocks to buy before they report this earnings season: Goldman
• Why QBE, Pinnacle, Rio Tinto, and Virgin Money shares are dropping
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Bernd Struben 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 no position in any of the stocks mentioned. 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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The Baby Bunting Group Ltd (ASX: BBN) share price is tumbling on the release of the company’s earnings for the first half of financial year 2023.

Shares in the baby goods retailer plummeted 9.8% on open before recovering. Right now, the stock is trading 2.44% lower at $2.40 a share.

Baby Bunting share price slumps as dividend slashed

Here are the key takeaways from the S&P/ASX 300 Index (ASX: XKO) company’s first half:

• $254.9 million of sales – a 6.6% improvement on the prior comparable period (pcp)
• $2.7 million of statutory net profit after tax (NPAT) – down 67%
• Pro forma NPAT was $5.1 million – a 59% fall
• Comparable store sales growth of 0.4% – down from 6.8%
• Gross margin came in at 37.2% – down from 39.3%
• Declared 2.7 cents per share fully franked interim dividend – a 59% tumble

The company’s gross profit margin was dinted by supply chain and shipping costs, better-than-expected engagement with its loyalty program, and the play gear category’s contraction – driven by price deflation and reduced demand.  

What else happened last half?

Consumer behaviour at the business shifted last half as shopping patterns normalised post-pandemic.

Instore sales grew 12.2% to make up 80% of all sales while touchless click-and-collect sales fell 30.2%. Meanwhile, online delivery sales grew 6.5%, with online sales making up 19.7% of all sales.

Five new Baby Bunting stores opened during the period while progress was made on the company’s ongoing transformation program.

What did management say?

Baby Bunting CEO and managing director Matt Spencer commented on the news driving the company’s share price today, saying:

Over the last 3 years, our sales have grown 36.7% noting that all Baby Bunting stores remained open during the COVID period. As life has normalised, the market share gains made through COVID have predominantly been held onto.

Post-COVID, our product segment performance is normalising. Nursery essentials – being a core category – continue to grow strongly and were up 12.7% in the half (over three years, this category is up 39.4%). Consumer staples, which are more widely available across general retail, saw a decline of 4.7%. Play time items (including Play gear) declined 3.6% in the half.

What’s next?

Baby Bunting provided a trading update for the first seven weeks of 2023 today.

It recorded 3.3% of total sales growth in the period. Though, its comparable store sales came in 2.1% lower.

Looking forward, the company previously announced it expects its full-year pro forma NPAT to come in between $21.5 million and $24 million and its gross profit margin to be between 38% and 39%.

Meanwhile, Baby Bunting Marketplace – presenting a “significant revenue opportunity” – is set to launch in the final quarter of this financial year.

Finally, the company announced Spencer’s resignation this morning. He will continue in the role until his successor is appointed.

Baby Bunting share price snapshot

The Baby Bunting share price has had a rough trot as of late.

The stock has tumbled 12% since the start of 2023 and is now trading 53% lower than it was this time last year.

For comparison, the ASX 300 has gained 6% year to date and 0.6% over the last 12 months.

The post Baby Bunting share price plunges as profits tumble 67% appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Baby Bunting Group. The Motley Fool Australia has recommended Baby Bunting Group. 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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A2 Milk Company Ltd (ASX: A2M) shares are ending the week strongly.

In morning trade, the infant formula company’s shares are up over 6% to $7.12.

Why are A2 Milk shares rising?

Investors have been bidding A2 Milk shares higher today after the company released an update on its quest for regulatory approval in China.

According to the release, its dairy processor partner, Synlait Milk Ltd (ASX: SM1), has announced that China’s Ministry for Primary Industries will commence an audit of Dunsandel facility on behalf of China’s State Administration for Market Regulation (SAMR) next week.

If everything goes to plan, A2 Milk’s China label infant milk formula products will soon be given the thumbs up in relation to the new national standards registration process. This would ensure that the company’s supply of China label products continues.

Should you invest before its results?

Investing before the release of a result can be a risky endeavour. As we have seen plenty of times this month, a poor result can send a share sinking lower. Conversely, a strong result can lead to a share hurtling higher.

And with A2 Milk shares trading within a fraction of their 52-week high and ahead of most broker valuations, it would seem that the risk is to the downside ahead of Monday’s results.

Though, it is worth noting that UBS has a price target well-ahead of the consensus at NZ$9.75 (A$8.87). This suggests that its shares could still rise 25% from current levels.

UBS believes that the company could more than double its FY 2022 net profit after tax by FY 2025 thanks to strong infant formula sales. It also highlights that China’s border reopening has led to share gains in the key market for A2 Milk and believes that there is currently no significant recovery priced into its shares.

Time will tell if the broker has made the right call.

The post Should I pour in and buy A2 Milk shares before the ASX 200 company reports on Monday? 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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