It has been another disappointing day of trade for the Bellamy's Australia Ltd (ASX: BAL) share price.
The infant formula company's shares have continued their decline on Thursday and slipped almost 9% lower to a 52-week low of $7.28.
Are its shares in the bargain bin?
I think that its shares are in the bargain bin right now after this week's sizeable decline. However, I'm not overly convinced that the selling has ended, so I wouldn't necessarily rush in to buy shares just yet.
In fact, until the company receives its approval to sell Chinese label products, I suspect its shares will remain under pressure. Especially given the underwhelming guidance it provided for Australian label sales in FY 2019 on Wednesday.
Australian label sales are expected to be down as much as 15% in the first half as it transitions to its new infant formula product, before ending the year flat.
While this is obviously very disappointing, I think investors need to focus less on the short term and more on its medium term prospects.
Despite FY 2019 looking like a bit of a write-off, management still believes it can hit its $500 million sales target in FY 2021. This compares to sales of $329 million in FY 2018 and implies explosive sales growth in FY 2020 and FY 2021.
If it can deliver on this then its shares will not be down at this level for long. This could make it a great buy and hold option along with A2 Milk Company Ltd (ASX: A2M) once the dust settles.
I'm not alone in thinking this way. A note out of Goldman Sachs this morning confirmed that it still rates Bellamy's a buy, albeit with a reduced price target of $13.20.
In FY 2020 Goldman expects sales and profit growth to accelerate again, leading to sales of $393.6 million and earnings per share of 52 cents. This means that its shares are now priced at a lowly 14x estimated FY 2020 earnings.
