Key points
- A2 Milk shares are trading close to multi-year lows
- Bell Potter believes there is significant upside potential for its shares
- The broker has reiterated its buy rating
The A2 Milk Company Ltd (ASX: A2M) share price is on course to end the week in the red.
In morning trade, the embattled infant formula and fresh milk company's shares are down 2.5% to $5.20.
This leaves the A2 Milk share price trading within a whisker of its multi-year low of $5.04.
Is the weakness in the A2 Milk share price a buying opportunity?
While opinion remains divided on the A2 Milk share price, one leading broker continues to see a lot of value in it.
According to a note out of Bell Potter, its analysts have retained their 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 almost 53% over the next 12 months.
What did the broker say?
The broker has been looking at industry data, which it appears to believe continues to support its buy thesis. This includes Australian exports to China (a daigou proxy) growing 146% year on year in November to an 18-month high.
All in all, the broker believes that A2 Milk has the potential to double its earnings in the coming years as its recovery continues. It doesn't believe this is reflected in the current A2 Milk share price.
Bell Potter commented: "There is no change to our Buy rating. We see the scope for EPS to double by FY26e, if A2M can execute on the China offline expansion strategy, while regaining 50% of the lost sales (from FY20-21) in English label IMF. Exiting the loss making US assets or navigating a turnaround at the MVM asset would likely accelerate this turnaround. We do not see the current share price as reflecting this potential."
