Why the a2 Milk Company share price rocketed higher today

The a2 Milk Company Ltd (ASX:A2M) share price has rocketed higher today after a broker upgrade…

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The a2 Milk Company Ltd (ASX: A2M) share price has been amongst the best performers on the ASX 200 index this morning.

At the time of writing the fresh milk and infant formula company's shares are up 5% to $15.20.

This latest gain means a2 Milk Company's shares have rocketed 46% higher since the start of the year.

Why is the a2 Milk Company share price charging higher today?

Investors have been snapping up the company's shares this morning after a2 Milk Company was the subject of a positive broker note out of UBS.

According to the note, UBS has upgraded a2 Milk Company's shares from a neutral rating to buy with an increased price target of NZ$17.50 (A$16.68).

This equates to potential upside of almost 10% for its shares over the next 12 months even after factoring in today's solid gain.

UBS is bullish on the company due to its strong position in the world's largest infant milk formula market – China.

Whilst the broker does believe there are downside risks such as regulation and changes to e-commerce laws in China, it believes the company is well-placed to mitigate the risks and sees significant growth potential in the country given its premium and differentiated brand.

UBS isn't the only broker that is positive on a2 Milk Company right now.

Goldman Sachs has added the company to its conviction buy list with a price target of A$17.40.

According to the note, its analysts believe the company's shares are attractively priced given its long term growth potential. It expects a2 Milk to grow its earnings by a CAGR of 25% between FY 2019 and FY 2021.

Elsewhere in the industry, the Bellamy's Australia Ltd (ASX: BAL) share price is trading 1.5% higher and the Bubs Australia Ltd (ASX: BUB) share price has climbed 2%.

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 Bellamy's Australia and BUBS AUST FPO. 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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