Why is the A2 Milk (ASX:A2M) share price leaping again today?

It’s nothing but green pastures for A2 Milk shares today…

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The A2 Milk Company Ltd (ASX: A2M) share price is continuing its ascension on the back of yesterday’s 13.3% rally.

At the time of writing, the fresh milk and infant formula producer’s shares are up 3.57% to $6.81 apiece. However, earlier in the day they were changing hands for as much as $7.23, a gain of almost 10% on yesterday’s closing price.

Today’s strong performance puts the company’s shares at a 3-month high. However, on paper shareholders are still carrying a heavy 53% loss over the past year.

The question is: what recent events have led to this share price rejuvenation?

Positive signs for sales channel

Investors are turning the A2 Milk share price greener than dairy cow pastures today. This comes amid renewed optimism for the company’s all-important daigou sales channel. This is likely being influenced by two different factors.

Firstly, the $4.32 billion specialty milk has gained gusto on the back of yesterday’s quarterly update by Bubs Australia Ltd (ASX: BUB). The smaller alternative infant formula company revealed a stellar quarter, with revenue surging 45% from the previous quarter.

Importantly, Bubs reported a 156% year-on-year resurgence in its Chinese business. Additionally, sales through the daigou channel increased 6.5 times from the prior year. As a result, investors are looking at the potential return of a critical revenue source for A2 Milk.

Secondly, earlier in October, Australian authorities approved international students vaccinated with Sinovac entry into Australia. This move indicates the potential resumption of Chinese nationals entering Australia and sending infant formula back home.

What analysts think of the A2 Milk share price

While the latest news suggests there is light at the end of the tunnel for A2 Milk, analysts at Credit Suisse prefer other opportunities. The broker maintains a price target of $5.50, indicating negative performance to come.

However, analysts at Citi have taken the other side of the fence on the A2 Milk share price. Presently, the broker holds a $7.20 price target on the milk maker. Behind this optimistic outlook is the belief that demand for the company’s products will improve.

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Motley Fool contributor Mitchell Lawler has no position 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 and BUBS AUST FPO. 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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