Why did the Bubs share price jump 16% today?

Bubs shares were on fire on Tuesday…

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Key points

  • Bubs' shares were on fire on Tuesday
  • This appears to have been driven by optimism that Bubs could benefit from shortages in the US
  • The US FDA is aiming to boost supply from domestic and foreign producers

The Bubs Australia Ltd (ASX: BUB) share price was a strong performer on Tuesday.

The infant formula company’s shares ended the day 16% higher at 43 cents.

Why did the Bubs share price pop?

The Bubs share price raced higher on Tuesday despite there being no news out of the company. However, some industry news may have given its shares a boost.

Overnight the US Food and Drug Administration (FDA) announced important updates on its ongoing work to increase the supply and availability of infant formula in the country.

US FDA Commissioner, Robert M. Califf M.D., commented:

We recognize the hardships that parents and caregivers have faced in obtaining infant formula and the FDA is focused on boosting the availability of the country’s supply of these products, including new steps regarding importation. We are also taking a look at the supply of infant formulas developed by manufacturers across the country and around the world to determine if a reallocation of their distribution can be made to help get the right product to the right place, at the right time.

Investors may believe this bodes well for Bubs, which launched its Aussie Bubs brand formula range on a number of ecommerce platforms in the country late last year. This has since been boosted by a presence in a number of supermarkets.

With its third-quarter update, Bubs Founder and CEO, Kristy Carr, provided an update on its footprint in the US. She said:

Our USA bricks and mortar retail footprint continues to expand with secured ranging of Aussie Bubs Goat and Grass Fed Toddler Formula in 254 Smart & Final supermarkets in Southern California, and 130 Buy Buy Baby stores spread across 37 states. These new listings complement our existing retail presence in 177 Ralph’s supermarkets and online on Walmart.com, Amazon.com and Thrive.com.

Time will tell if Bubs benefits from these shortages but investors seem to be betting on it doing so.

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. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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