The market may have tumbled notably lower again on Thursday, but that has not stopped the A2 Milk Company Ltd (ASX: A2M) share price from pushing higher.
In afternoon trade the fresh milk and infant formula company’s shares are up 1% to $12.30.
Why is the a2 Milk Company share price pushing higher?
The company’s shares have managed to avoid the market selloff today after they were the subject of a reasonably positive broker note out of UBS this morning.
According to the note, equity analysts at the investment bank have retained their buy rating but trimmed the price target on its shares slightly to NZ$16.40 (A$15.11).
This price target implies potential upside of almost 23% over the next 12 months even after factoring in today’s gains.
Although the broker suspects that management is willing to increase investment and sacrifice margin in order to achieve market share gains and strong revenue growth, it expects things to ease by FY 2023.
After which, a2 Milk Company should be a larger and more profitable company if everything goes to plan.
UBS isn’t the only broker that is positive on a2 Milk Company as an investment. A note out of the Macquarie equities desk last month following its inaugural China investor day reveals that its analysts have an outperform rating and $16.70 price target on the company’s shares.
This price target implies an even greater return over the next 12 months of almost 36%.
According to the note, it was pleased with its China event and believes its presentation demonstrated the significant opportunity a2 Milk Company has in the country and also management’s deep understanding of the key market.
I agree with both UBS and Macquarie on a2 Milk Company and would also class its shares as a buy right now. Furthermore, I would choose them ahead of rivals Bellamy’s Australia Ltd (ASX: BAL) and Bubs Australia Ltd (ASX: BUB).
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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 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.