Are A2 Milk (ASX:A2M) and this beaten down share bargain buys?

Are these shares going to rebound?

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The Australian share market may be charging higher in 2021, but not all shares have been able to follow suit.

The two ASX shares listed below have been beaten down this year. Is this a buying opportunity for investors?

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price has been among the worst performers this year with a decline of 47%. This has of course been driven by a significant deterioration in the infant formula company’s performance.

One leading broker that is sticking with the company is Bell Potter. It recently retained its buy rating and $7.70 price target on the company’s shares. Based on the current A2 Milk share price, this implies potential upside of 25% for investors.

Bell Potter was pleased with A2 Milk’s recent investor update and the targets that management has set over the medium term.

It commented: “A2M have indicated a medium term target of ~$2.0Bn in revenue with a target margin in the teens. A margin of low-mid 20’s would be achievable longer-term, subject to a higher EL [English label] recovery and market share gains. The revenue targets compares to our FY24e target of ~$1.6Bn and so is a fairly material uplift if achieved.”

It also sees a lot of value in management’s plan to double its market share in China through an expansion in mother and baby stores (MBS) distribution from 23.8k stores to 30k-35k stores.

“In our view the runway to expanding MBS channels is achievable when viewed in the context of competitors and based on average sales rates by A2M and competitors, achieving the distribution expansion alone would add NZ$200-400m in revenue. As such we do not see the PRC label target as particularly aggressive,” it added.

All in all, the broker appears to see the weakness in the A2 Milk share price this year as a buying opportunity for investors.

Bravura Solutions Ltd (ASX: BVS)

The Bravura share price is down 18% since the start of the year. While this is disappointing, the team at Goldman Sachs believe it could be a buying opportunity for investors.

This week the broker reiterated its buy rating and $3.70 price target on the wealth management technology company’s shares. This implies potential upside of 39% from the current Bravura share price.

Goldman notes that the company is very well positioned to deliver growth into FY 2022 and beyond. This is due to its healthy pipeline in key markets, a shift to consumption-based contracts, acquisitions, and the evolution of the Australian superannuation market.

In respect to the latter, the broker said: “BVS expects the evolution of this market will provide significant opportunities for Sonata Alta and Digital Advice, addressing client needs including a seamless digital experience, ongoing changes in regulation and pressure to increase operational efficiency. In our view this dynamic could see further contracts with large superannuation funds, similar to the Aware Super contract.”

Overall, with the tide now turning, Goldman appears to believe investors should be jumping on board before it’s too late.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. 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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