Why the Bellamy’s Australia Ltd (ASX:BAL) share price has tumbled lower today

The market may have charged higher on Thursday but the same cannot be said for the Bellamy’s Australia Ltd (ASX: BAL) share price.

In afternoon trade the organic infant formula company’s shares are down 4.5% to $7.30.

Why are Bellamy’s shares sinking lower today?

Bellamy’s has been hosting an investor day today and released a presentation to the market ahead of the event.

Its shares were up strongly this week on the back of no news, so I suspect that some investors had been hoping the company would provide some positive news around its SAMR application today.

This accreditation is required for the company to sell its Chinese labelled products in the massive China market.

Bellamy’s made its application in December 2017 and was expected by many to have it granted some time ago. Delays have led to the company falling well short of the market’s sales estimates.

But once again, the company is still waiting to be granted its accreditation. It advised today that it remains in progress, but is confident in its technical application.

Possibly in an attempt to offset some the missed sales, the company announced today that it is assessing Indonesia and the Philippines as possible expansion options. This is on top of its launch into the Vietnam market last month.

Should you buy the dip?

I suspect that Bellamy’s shares will trade in a narrow range until there is news relating to its SAMR application.

While the delay is disappointing, I remain confident it will come and expect it to underpin Bellamy’s strong long-term growth.

Today the company reiterated that it sees a clear pathway to reach +$500 million in revenue by FY 2021. This compares to revenue of $329 million in FY 2018.

In light of this, I believe it is worth considering an investment in Bellamy’s and dealing with the short-term pain for the potential long-term gain.

All in all, I would class Bellamy’s as a buy along with A2 Milk Company Ltd (ASX: A2M) and Freedom Foods Group Ltd (ASX: FNP).

If you like growth shares like Bellamy's then check out these top growth shares that have been tipped for big things in 2019.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Freedom Foods Group Limited. 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.

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