Tag: Motley Fool

If you’re looking to add some new shares to your portfolio in April, then you might want to take a look at the ones listed below.

They could be among the best on the market and destined to deliver strong growth over the 2020s. Here’s why they are rated highly:

Afterpay Ltd (ASX: APT)

The first ASX share to consider is Afterpay. Due to the increasing popularity of its buy now pay later platform and its global expansion, the payments company looks exceptionally well-positioned for growth over the 2020s. In respect to its expansion, Afterpay has just launched in Canada, is launching in mainland Europe shortly, and is looking closely at the Asia market. Combined with its $5 trillion opportunity in the United States, the future looks bright for the company.

Morgan Stanley currently has an overweight rating and $149.00 price target on its shares.

Pushpay Holdings Group Ltd (ASX: PPH)

Another ASX share to consider buying is Pushpay. It is a donor management and community engagement platform provider for the faith sector. Thanks to the shift to a cashless society and social distancing measures, Pushpay’s platform is proving invaluable for churches. This has led to it delivering stellar sales growth over the last few years. And thanks to operating leverage, its earnings have been growing at an even quicker rate.

Goldman Sachs is a fan of Pushpay and has a conviction buy rating and $2.59 price target on its shares.

ResMed Inc. (ASX: RMD)

A final ASX share to consider is ResMed. This sleep treatment-focused medical device company appears well-placed for growth thanks to its industry-leading products and sizeable market opportunity. ResMed also has a growing ecosystem of connected devices generating invaluable data insights. This could give it a real edge over the competition in the future and puts it in a great position to benefit from the shift to home healthcare.

Bell Potter is positive on ResMed’s outlook. It currently has a buy rating and $29.00 price target on its shares.

More reading

• 2 great ASX payment shares to buy
• Zip (ASX:Z1P) eyes potential stock and crypto trading services
• Top broker tips Zip (ASX:Z1P) share price to rocket higher
• Brokers pick these ASX 200 shares to outperform the market
• Is the Afterpay (ASX:APT) share price set to surge later this month?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 3 of the best ASX shares to buy this month appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2RJisl7

Are you looking for some new additions to your portfolio? Then you might want to consider the two fantastic ASX shares named below.

They could be among the best shares available to investors on the Australian share market and capable of generating strong returns for investors over the next decade. Here’s why they might be five-star stocks:

Altium Limited (ASX: ALU)

The first five-star stock to consider buying is Altium. It is a leading electronic design software provider which has exposure to the rapidly growing Internet of Things and artificial intelligence markets. As these markets are underpinning the proliferation of electronic devices globally, demand for software subscriptions looks set to increase materially over the next decade.

In addition to this, Altium’s other businesses, such as workflow solution platform NEXUS and electronic parts search engine Octopart, are supporting it growth and have sizeable market opportunities of their own. A testament to the quality of NEXUS is that it counts Tesla and SpaceX as customers.

Given the favourable industry tailwinds and its leadership position, Altium appears well-placed to achieve its revenue target of US$500 million in FY 2025/26. This will be more than double what it expects to achieve in FY 2021.

Analysts at Morgan Stanley are positive on the company and have an overweight rating and $37.00 price target on its shares.

CSL Limited (ASX: CSL)

Another five-star stock to consider is CSL. This biotherapeutics giant is easily one of the highest quality companies that Australia has ever produced.

When it was founded all the way back in 1916 as the Commonwealth Serum Laboratories, the company was aiming to service the needs of a nation isolated by war. Since then it has become a global giant with a portfolio of life-saving therapies and vaccines.

In fact, that portfolio continues to grow thanks to the company’s investment in research and development. Each year CSL invests somewhere in the region of 10% to 12% of its sales revenue back into its these activities. This helps to ensure that CSL is at the forefront of innovation in the industry.

And while the pandemic has negatively impacted its CSL Behring business, some of this is being offset by increased demand for flu vaccines from its Seqirus business.

Once the pandemic passes and plasma collection headwinds ease, both sides of the business will be pulling together again. Combined with potential launches of new and lucrative therapies, the future looks bright for CSL.

Last month Credit Suisse upgraded CSL’s shares to an outperform rating with a $315.00 price target.

More reading

• 3 stellar ASX growth shares to buy
• The Monadelphous (ASX:MND) share price surges as Rio Tinto (ASX:RIO) overhang lifts
• 2 of the best ASX 200 blue chip shares to buy
• 2 excellent ASX shares that could be strong buys
• CSL (ASX:CSL) share price falls amid ongoing AstraZeneca uncertainty

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 Bruce Jackson.

The post 2 five-star stocks to buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3tsPrIn

There are a few S&P/ASX 200 Index (ASX: XJO) dividend shares that have relatively high dividend yields.

Businesses in the ASX 200 are large enough where they are normally generating high levels of cashflow and can fund sizeable dividends.

These two businesses have high dividend payout ratios and high dividend yields:

Charter Hall Long WALE REIT (ASX: CLW)

This is a real estate investment trust (REIT) which is managed by Charter Hall Group (ASX: CHC).

It aims to invest in high quality real estate assets that are predominantly leased to corporate and government tenants on long term leases. It actually has one of the longest weighted average lease expiry (WALE) in the REIT industry, of 14.1 years.

The ASX 200 dividend share has 459 properties worth $4.48 billion.

Those properties are spread across a number of resilient and defensive sectors. Its income exposure is spread across the following: telecommunications (17%), government (15%), grocery and distribution (14%), fuel and convenience (13%), pubs and bottle shops (12%), food manufacturing (10%), waste & recycling (2%) and ‘other’ (16%). ‘Other’ includes retail, banking, finance and security and defence services.

Major tenants include Telstra Corporation Ltd (ASX: TLS), Australian government entities, BP, Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Coles Group Ltd (ASX: COL), David Jones, Metcash Limited (ASX: MTS), Arnott’s Group, Westpac Banking Corp (ASX: WBC) and Bunnings.

The FY21 half-year result saw continued growth of the business despite all of the COVID-19 impacts. HY21 saw operating earnings per security (EPS) increase by 3.6% to 14.5 cents. The distribution also grew 3.6% to 14.5 cents because it has a 100% payout ratio. It also grew its distribution during 2020 despite COVID-19.

In FY21, it’s expecting to increase its operating EPS by at least 2.8% to 29.1 cents, which translates to a forward distribution yield of 5.9%.

The ASX 200 dividend share is rated as a buy by Morgan Stanley.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a funds management business with a market capitalisation of $8.8 billion according to the ASX.

It generates most of its revenue and profit from managing a large pool of capital for investors. In the latest monthly update for March 2021, Magellan saw its total funds under management (FUM) increase by $5.4 billion, with $206 million of net inflows.

The leadership team are always looking for new and innovative ways to service clients and financial planners. The restructuring of its global equity funds was one example.

It’s currently working on launching a retirement product, it just needs approval from regulators.

The ASX 200 dividend share is also looking for businesses to take investments in. They have to be high quality businesses with meaningful scale, provide attractive returns and contribute intellectual capital.

For example, it has taken a $156 million investment in Barrenjoey. It has also invested $20 million in Finclear, as well as taking a stake in Guzman y Gomez.

In the FY21 half-year result it decided to grow the interim dividend by 5% to 97.1 cents per share.

It’s currently rated as a buy by Morgans, with a price target of $58.26. The broker expects the FY21 dividend to be $2.06, which would be a partially franked dividend yield of 4.25%.

More reading

• Top brokers name 3 ASX shares to sell next week
• These were the best performing ASX 200 shares last week
• What to make of all this good news?
• These were the worst performing ASX 200 shares last week
• This underperforming ASX large cap is sitting on a ~10% dividend yield

Motley Fool contributor Tristan Harrison owns shares of Magellan Financial Group. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 high-yielding ASX 200 dividend shares appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2QfnTYq

While a number of shares have just reached 52-week highs or better this week, not all shares are performing as strongly.

Two ASX shares that have been beaten down this year are listed below. Here’s why they could be in the bargain bin now:

Bravura Solutions Ltd (ASX: BVS)

The Bravura share price is down 17% since the start of the year and an even more disappointing 38% over the last 12 months.

Investors have been selling the shares of the provider of software products and services to the wealth management and funds administration industries due to its poor performance in FY 2021. This has been driven by headwinds created by COVID-19 and Brexit. 

One broker that appears to see this as a buying opportunity is Goldman Sachs. It currently has a buy rating and $3.70 price target on the company’s shares. This implies potential upside of 37% over the next 12 months.

Although Goldman Sachs acknowledges that uncertainty remains in the near term as a result of COVID-19, it notes that its new contract pipeline is strong. Outside this, it believes the opportunity for Bravura remains compelling in the UK and Australia. It also expects its emerging microservices ecosystem strategy to transform the business to a subscription-based model and drive growth.

Kogan.com Ltd (ASX: KGN)

Another ASX growth share that has come under pressure this year is Kogan. The ecommerce company’s shares are down 31% since the start of the year.

This is despite the company delivering one of the strongest results during earnings season in February. For the six months ended 31 December, Kogan reported a 96% increase in gross sales and a 140% jump in earnings before interest, tax, depreciation and amortisation (EBITDA). This strong growth was driven by a surge in customer numbers, increased repeat customer rates, acquisitions, and the accelerating shift to online shopping.

Credit Suisse remains positive on the company and recently retained its outperform rating and $20.85 price target on its shares. Based on the latest Kogan share price, this equates to potential upside of almost 57% over the next 12 months.

More reading

• 3 stellar ASX growth shares to buy
• Why Kogan (ASX:KGN) should be on your watchlist at this share price
• 3 top ASX shares to buy this week
• This could be boosting the Kogan (ASX:KGN) share price today
• 2 outstanding ASX tech shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 dirt cheap ASX shares to buy next week appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3dsVM0R

According to the latest Westpac Banking Corp (ASX: WBC) Weekly economics report, the banking giant continues to forecast the cash rate staying on hold until at least the end of 2022. However, it could be much longer based on its estimates for unemployment and inflation.

Chief Economist Bill Evans said: “Markets will focus on the revised forecast for the path of the unemployment rate following the sharp improvement in the recent data. There is likely to be a downward recalibration in the RBA’s forecast path for the unemployment rate but the Bank also appears to have lowered its estimates of the full employment rate.”

“The net effect will be consistent policy guidance that it will still be some time – 2024 at the earliest – before the Bank expects to achieve its full employment and inflation targets. The faster likely improvement in the labour market will be offset by the more challenging target for the full employment rate,” he concluded.

While this is disappointing for income investors, all is not lost. The Australian share market is home to a number of quality companies that offer attractive dividend yields.

But which dividend shares should you buy? Here are two that come highly rated right now:

Accent Group Ltd (ASX: AX1)

Accent is a leading leisure footwear-focused retailer that owns a number of popular retail store brands. It has been growing its earnings and dividend at a solid rate for years and appears well placed to continue this trend. 

Bell Potter is positive on the company and has a buy rating and $2.65 price target on its shares. It is forecasting dividends of 11.9 cents per share in FY 2021 and 12.2 cents per share in FY 2022. This will mean fully franked yields of 5% and 5.1%, respectively, over the next two years.

Coles Group Ltd (ASX: COL)

Another ASX dividend share to consider buying Coles. This supermarket operator looks well-placed for growth over the 2020s thanks to its strong market position, Refreshed Strategy, and focus on automation.

Goldman Sachs is a fan of the company. Its analysts currently have a buy rating and $20.70 price target on its shares. Goldman is forecasting dividends of 62 cents per share in FY 2021 and a 67 cents per share in FY 2022. Based on the current Coles share price of $15.56, this represents fully franked yields of 4% and 4.3%, respectively.

More reading

• Where to invest your Rio Tinto (ASX:RIO) dividends
• Is the Klarna / Flybuys partnership the future for ASX BNPL providers?
• 2 ASX dividend shares with large yields and consistent payouts
• Got money to invest for income? Here are 2 ASX dividend shares
• ASX 200 Weekly Wrap: ASX sees 7,000 points once more

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Rates could be on hold for years so buy these excellent ASX dividend shares appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3akrF9O

Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Macquarie Group Ltd (ASX: MQG)

According to a note out of Citi, its analysts have retained their sell rating and $125.00 price target on this investment bank’s shares. Citi believes it is inevitable that Macquarie will be forced to guide to an earnings decline next year. This is due to some significant one-offs boosting its profits this year. In light of this, the broker believes its shares are overvalued at the current level. The Macquarie share price was fetching $156.25 at the end of the week.

Magellan Financial Group Ltd (ASX: MFG)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating and $45.56 price target on this fund manager’s shares. The broker has concerns over the deterioration of its investment performance and fears it could impact fund inflows and revenue. As result, it believes its shares are expensive at the current level. The Magellan share price was trading at $48.48 at Friday’s close.

Zip Co Ltd (ASX: Z1P)

Analysts at UBS have retained their sell rating but lifted their price target on this buy now pay later (BNPL) provider’s shares to $6.50. According to the note, while the broker was pleased with Zip’s strong growth during the third quarter, it isn’t enough for a change of rating. UBS notes that Zip is still a relatively early stage investment with significant execution risks. It also has concerns over what will happen when COVID stimulus payments end.  The Zip share price ended the week notably higher than this price target at $9.36.

More reading

• Why the Zip (ASX:Z1P) share price can go even higher
• These were the best performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy now
• ASX 200 rises, Zip sinks, BOQ reports
• Zip (ASX:Z1P) eyes potential stock and crypto trading services

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Top brokers name 3 ASX shares to sell next week appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3e8ilXW

There are a few ASX dividend shares that keep increasing their dividend every year for investors.

COVID-19 caused a lot of businesses to cut or maintain their dividends because of the enormous financial impacts and uncertainty.

But a few kept increasing, like these two:

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a diversified portfolio of farms across cattle, vineyards, almonds, macadamias and cropping (sugar and cotton).

Its farms are diversified across climate conditions and geographically.

The ASX dividend share has a goal of increasing its distribution by 4% every year for investors. It has been successful with this goal. Rural Funds grew the distribution by 4% in 2020, unfazed by COVID-19 impacts.

The farmland REIT is able to generate growth in two main ways. Its farms have rental increases built into the contracts, either a fixed 2.5% annual increase or CPI inflation growth, plus market reviews.

Rural Funds can also grow the value and rental potential of its farms thanks to productivity investments at the farms. For example, at its cattle properties it has been investing in more water access points.

At the current Rural Funds share price it has an expected FY22 distribution yield of around 5%, based on the 11.73 cents per units forecast by management.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

This ASX dividend share is also called Soul Patts. It’s an investment conglomerate that has been operating for over a century.

Soul Patts started as a pharmacy business, but it’s now invested in a wide array of sectors and businesses.

In terms of the listed investments, some of its biggest positions include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Australian Pharmaceutical Industries Ltd (ASX: API), Bki Investment Co Ltd (ASX: BKI), Milton Corporation Limited (ASX: MLT), Pengana International Equities Ltd (ASX: PIA) and Pengana Capital Group Ltd (ASX: PCG).

But that’s not all. Soul Patts also has a portfolio of private businesses. It’s invested in resources, agriculture, swimming schools, financial services and a business called Ampcontrol.

The ASX dividend share funds its dividend payouts to shareholders from the investment income it receives from its portfolio, after paying for its operating expenses. It can then re-invest the rest into new opportunities to grow its cashflow further.

The investment team within Soul Patts can pursue any investment opportunity in any sector, listed or unlisted.

It tries to invest in a contrarian way and have a portfolio of largely uncorrelated assets which are defensive. For example, it recently tried to acquire aged care operator Regis Healthcare Ltd (ASX: REG) when the share price was a lot lower.

At the current Soul Patts share price, it has a grossed-up dividend yield of 2.6%.

More reading

• 2 top ASX dividend shares to buy this month
• Why Brickworks, Imugene, Platinum, & Synlait shares are dropping today
• 5 things to watch on the ASX 200 on Monday
• 3 small caps ASX dividend shares offering big income
• 3 ASX dividend shares to buy today

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 ASX dividend shares that keep growing their dividend every year appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/32n2z5I

If you’re a fan of growth shares, then you might want to take a look at the exchange traded funds (ETFs) listed below.

These ETFs give investors access to a collection of some of the highest quality growth shares in the world. Here’s why they could be fantastic additions to most portfolios:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

This ETF gives investors exposure to some of the most exciting growth shares in the Asian market. These companies are revolutionising the lives of billions of people in the region and appear well-placed for growth over the next decade and beyond.

One of the shares in the fund is search engine giant Baidu. With Google banned in China, Baidu has filled the void and is dominating search in the lucrative market. In fact, Statista estimates that it has a 75% share of the search market in the country.

But Baidu is more than just a search engine. The company is also making great leaps with artificial intelligence and is aiming to be an autonomous vehicle powerhouse.

In respect to the latter, in February Baidu launched a multi-modal Mobility-as-a-Service pilot program. According to Forbes, this program integrates many different autonomous vehicle platforms, all using the company’s Apollo autonomous driving solution.

BetaShares NASDAQ 100 ETF (ASX: NDQ)

Another ETF to consider is the BetaShares NASDAQ 100 ETF. This fund gives investors exposure to 100 of the highest quality growth shares that the world has to offer.

These are the largest non-financial companies on the famous Nasdaq index and includes the likes of Amazon, Apple, Facebook, Microsoft, Netflix, and Tesla.

The Nasdaq 100 has smashed the ASX 200 over the last few years. Positively, thanks to the quality of these companies and their very positive outlooks, the index (and therefore the ETF) look well-placed to continue this trend over the next decade.

More reading

• 2 outstanding tech ETFs for ASX investors to buy this month
• 3 high quality ETFs for ASX investors to buy
• Afterpay and Zip were among the most traded ASX shares last week
• 2 investing approaches to help get you started on the ASX
• 2 highly rated ASX tech shares to buy this month

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 outstanding ETFs for ASX growth investors to buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3ttPDXL

The Zip Co Ltd (ASX: Z1P) share price was an exceptionally strong performer last week.

The buy now pay later (BNPL) provider’s shares smashed the market with a gain of 13%.

This made the Zip share price the best performer on the ASX 200 index. It also stretched its year to date gain to 67%.

Why did the Zip share price rocket higher?

Investors were bidding the Zip share price higher last week after its third quarter update impressed the market.

For the three months ended 31 March, Zip recorded an 80% increase in group quarterly revenue to $114.4 million. This was driven by strong customer and transaction growth, particularly from its Quadpay business.

Active customers reached 6.4 million globally, up 88% on the prior corresponding period and 12.3% from 5.7 million at the end of December. As for transactions, Zip reported a 195% increase in transaction numbers to 12.4 million and a 114% jump in quarterly transaction volume to $1.6 billion.

Is it too late to invest?

According to one leading broker, there’s still decent upside left in the Zip share price.

Last week Bell Potter put a buy rating and $11.30 price target on the company’s shares.

Based on the latest Zip share price, this implies potential upside of almost 21% over the next 12 months.

It commented: “We are surprised with the timing of the $400 million convertible note issuance when considering that Zip recently raised ~$180 million in equity and the company has not provided any new use cases for the additional capital. While the additional capital reduces Zip’s interest costs and strengthens the balance sheet, we do not anticipate material changes to consensus forecasts on the back of it. We maintain our Buy rating as we see upside risks to our near-term forecasts driven by Quadpay.”

All in all, although Zip’s shares have been on fire in 2021, the gains may not be over according to this broker.

More reading

• These were the best performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy now
• ASX 200 rises, Zip sinks, BOQ reports
• Zip (ASX:Z1P) eyes potential stock and crypto trading services
• Top broker tips Zip (ASX:Z1P) share price to rocket higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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 Bruce Jackson.

The post Why the Zip (ASX:Z1P) share price can go even higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3uWEHlN

It certainly has been a tough 12 months for the A2 Milk Company Ltd (ASX: A2M) share price.

The infant formula and fresh milk company’s shares are down a massive 57% since this time last year.

This leaves the a2 Milk share price trading close to multi-year lows.

Why is the a2 Milk share price out of form?

The a2 Milk share price has come under pressure over the last 12 months due to its bitterly disappointing performance during COVID-19.

While the company was actually a big winner from stock piling at the height of the pandemic, it has been downhill from there.

Weakness in the daigou channel and pantry destocking led to management making a series of earnings guidance downgrades.

Unfortunately, trading conditions remain tough and FY 2022 is starting to look like it could also be impacted by the same headwinds.

When will it be time to invest again?

While trading conditions are tough for the company, one leading broker believes the weakness in the a2 Milk share price has created a buying opportunity.

According to a note out of Bell Potter, its analysts have upgraded the company’s shares to a buy rating with a $9.50 price target.

This implies potential upside of almost 17% for its shares over the next 12 months.

What did it say?

The broker made the move on the belief that it is witnessing early signs of a reversal in the issues that preceded the recent downgrade cycle.

It explained: “YOY declines in finished IMF exports from Australia to China (Daigou proxy) continue, however, we have witnessed two sequential monthly gains since the Dec’20 lows. This uplift has occurred in a period we typically wouldn’t expect to see this.”

“When viewed in conjunction with a reduced [inventory] infill, this could imply the early stages of inventory levels beginning to recede,” it added.

Another reason the broker is positive is a2 Milk’s opportunity in store in mainland China. Its presence has been growing quickly but still has a long way to go.

The broker commented: “Total offline distribution points looked to approach ~30k in the March quarter. At this level, A2M’s offline presence is still materially below that of H&H (~80k) and Feihe (~110k). The runway in distribution expansion has the scope to mitigate the headwinds of declining China births (-15% YOY in CY20).”

All in all, Bell Potter appears to believe the worst is over for the company and the a2 Milk share price now.

More reading

• China’s dairy stocks rise: What does this mean for the A2 Milk (ASX:A2M) share price?
• A2 Milk (ASX:A2M) share price sours amid international student uncertainty
• Is it time to get your hopes up for the A2 Milk (ASX: A2M) share price?
• Why the Bubs (ASX:BUB) share price is up 5% today
• Pivoting from infant formula, what’s next for the Jatcorp (ASX:JAT) share price?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the worst over for the A2 Milk (ASX:A2M) share price? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3dqlhA0