Why the a2 Milk Company Ltd (Australia) share price is going nuts today

a2 Milk Company Ltd (Australia) (ASX:A2M) shares have been a big mover this afternoon after management advised that business continues to boom. Should you invest?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shareholders of a2 Milk Company Ltd (Australia) (ASX: A2M) were able to breathe a huge sigh of relief this afternoon after the dairy company put investors at ease with another trading update.

In light of the drama that has unfolded at Bellamy's Australia Ltd (ASX: BAL) this month, a2 Milk's own share price has come under heavy selling pressure.

But investors can put all of these concerns to bed now, with management confirming that business is still booming since its last update. Today's release states that:

"The Company notes the higher level of recent commentary and interest from shareholders relating to the infant formula market. In this context, the Company wishes to confirm that, consistent with the trends communicated at the Annual Meeting, the business continues to trade very strongly reflecting, in particular, significant year-on-year growth in its infant formula business."

Unsurprisingly a2 Milk's share price rocketed on the news. At one stage its shares were up by almost 10% to $2.14. They have since given back some gains and at the time of writing sit 6% higher at $2.07.

Despite this its shares are still trading almost 20% lower than a recent 52-week high and at a price which I think is great value for buy and hold investors.

But I would caution against throwing all your eggs in the one basket. Whilst I have faith that a2 Milk has a talented management team that will navigate the changing regulations in China, it certainly is a volatile place for foreigners to operate. Regulations can change in the blink of an eye, causing businesses to almost collapse just as quickly. Just ask Bellamy's management.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »