The market may be pushing higher on Friday but the same cannot be said for the Bellamy's Australia Ltd (ASX: BAL) share price.
The infant formula company's shares are down over 2% to $9.88 in late morning trade.
Despite this decline, Bellamy's shares are still up a sizeable 30% since the start of the year.
Why has the Bellamy's share price dropped lower?
Investors appear to have been hitting the sell button today after analysts at Citi downgraded its shares.
According to the note, Citi has downgraded Bellamy's from a buy rating to a neutral with a $10.50 price target.
Although it remains confident on the company's growth strategy, it appears that at around 26.5x estimated FY 2020 earnings, Citi felt its shares had run too far and downgraded them on valuation grounds.
In addition to this, the broker has suggested that there is a risk that its SAMR accreditation required to sell Chinese labelled products could be delayed further.
If this happened it could lead to Bellamy's falling short of the market's expectations in FY 2020 and put pressure on its share price.
Should you invest?
I agree with Citi that Bellamy's shares are looking fully valued now. However, I would still be a buyer of them if you planned to hold them for the long term.
After all, if and when it is finally granted SAMR accreditation it is likely to give its sales and profits an incredible boost. Especially after it invested heavily in marketing activities in the country to strengthen the brand with Chinese consumers.
In addition to Bellamy's, I think fellow infant formula company A2 Milk Company Ltd (ASX: A2M) would be a great option for growth investors. I would choose both ahead of their promising but unproven smaller rival Bubs Australia Ltd (ASX: BUB).
