Here’s why the A2 Milk (ASX:A2M) share price is up 11% this week

It’s been a great week on the ASX for the milk company. We take a closer look…

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Older man and young boy smiling while drinking milk with milk moustaches

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The A2 Milk Company Ltd (ASX: A2M) share price has climbed into the green this week.

Whereas the S&P/ASX 200 Index (ASX: XJO) has posted a loss of 1.66% over the past week, A2 Milk shares are up 11%.

Let’s investigate further.

What’s happening with A2 Milk?

The big news earlier in the week was regarding A2’s potential acquisition targeting from global foods powerhouse Nestle.

Recall that A2 has faced headwinds this year. The Chinese infant nutrition markets posed particularly challenging dynamics for the company.

Moreover, the company advised that recent actions taken to address headwinds in its cross-border e-commerce channels “would not result in sufficient improvement” on Q3 pricing and sales.

As such, Nestle purportedly is targeting the milk company, albeit choosing to wait for its FY21 results before making a decision.

However, in an interesting turn of events, A2 Milk is currently engaged in a trademark battle with Nestle.

The company is appealing a decision that Nestle would be allowed to keep its own infant formula range, that contains the A2 protein.

A2’s original challenge was rejected on grounds the company failed to establish a case for opposition.

Given there is no market-sensitive information today, it stands to reason that investors are pushing the A2 Milk share price higher this week on the back of this major event.

A2 Milk share price snapshot

The A2 Milk share price has had a choppy year to date, posting a loss of 43%. Over the past 12 months, the company’s shares have also fallen by around 64%.

As a result, these returns have lagged the broad index’s return of around 25% over the past year.

A2 Milk shares closed on Friday at $6.52, down 1.21% on the day.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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