Top broker says buy A2 Milk Company Ltd (ASX:A2M) shares

The A2 Milk Company Ltd (ASX:A2M) share price could be heading to $12.70 according to one leading broker. Here’s what you need to know…

| More on:
Brokers trading shares

The A2 Milk Company Ltd (ASX: A2M) share price has bounced back from yesterday鈥檚 selloff and is pushing notably higher on Thursday.

At the time of writing the infant formula and dairy company鈥檚 shares are up almost 4% to $10.95.

Why are its shares bouncing back today?

The market appears to have responded well to the reasonably positive reaction by brokers to yesterday鈥檚 sales update.

Although Citi has downgraded the company鈥檚 shares down to a neutral rating and $11.00 price target, others haven鈥檛 been so bearish.

According to a note out of Goldman Sachs, its analysts have retained their buy rating but cut the price target on its shares ever so slightly to $12.70.

Goldman believes that the weaker than expected sales update is transitory in nature. The broker suspects that it could be the result of the company reducing supply of product over the fourth quarter in order to allow for a smoother transition to its newer packaged product in both China and Australia.

Backing up this theory is demand on China鈥檚 Tmall. The broker鈥檚 Tmall tracker suggests that consumer demand remains strong, with sales of its infant formula between January and April growing 125% on the prior corresponding period.

As a result, Goldman remains confident that this is a temporary slowdown and that underlying demand fundamentals remain unchanged.

Should you invest?

I think that Goldman Sachs makes some valid points in its note and would agree that it is a buy.

Though, considering the premium that its shares do still trade at, investors may want to limit an investment to just a small part of their portfolio.

In addition to a2 Milk Company, I think the same applies to rival Bellamy鈥檚 Australia Ltd (ASX: BAL) which was also sold off yesterday. A small position with a long-term view in Bellamy’s could one day prove to be a very rewarding investment.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 Scott Phillips.

More on 鈴革笍 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.
鈴革笍 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
鈴革笍 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

asx share price competitions represented by businessmen arm wrestling
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
鈴革笍 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

person reading news on mobile phone
鈴革笍 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