Financial news wire are reporting that Brisbane-based stockbroker and research house Morgans has slapped a ‘buy’ rating and higher ‘price target’ on a2 Milk Company Ltd (ASX: A2M) shares today. As a result the stock climbed 1.3% to a record high of $16.47 and is well ahead of the -0.3% return for the S&P/ ASX200 (ASX: XJO).
Notably, Morgans has joined both UBS and Goldman Sachs in upgrading their ratings on the stock this July, with all three sets of analysts noting strong sales data coming out of China, alongside the a2-only-protein supermarket milk and infant formula business pushing through price rises on some core products.
Supermarket shoppers in Australia may have noticed a large carton of a2 Milk now costs $5 at their local Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW), although the approximate 5% price rise doesn’t appear to have slowed down sales. Its infant formula also sells for premium prices in Australia and China. Investing legends such as Warren Buffett have often emphasised pricing power as a sign that a business may be a long-term share market winner.
a2 Milk also boasts no debt, a high return on equity, and is still growing at a rapid rate.
It’s for all of these reasons and more that I also made the company my top stock to buy in July when shares changed hands for $13.80. It’s up nearly 20% in the month since then as brokers update their numbers for what should be a strong report in August 2019.
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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.
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