The A2 Milk Company Ltd (ASX: A2M) share price is having a day to forget on Wednesday.
This comes after the embattled company provided an update regarding its FDA application to import products into the United States.
During the first few minutes of market open, shares in the infant formula company dropped to an intraday low of $4.60.
However, since then, its shares have moved in circles to currently trade at $4.71, down 7.83%.
Why did the A2 Milk share price fall?
The notice from the US Food and Drug Administration (FDA) to defer further requests to import infant milk formula (IMF) products into the United States is impacting the A2 Milk share price today.
The shock news appears to have caught investors off guard after A2 Milk shares rose more than 10% in the past week.
This followed the recent media speculation that the company was nearing FDA approval, in which management dismissed the report thereafter.
Nonetheless, A2 Milk would have been hoping to receive a similar outcome to its smaller rival, Bubs Australia Ltd (ASX: BUB). The latter secured a deal with the Biden Administration to import 1.25 million tins of baby formula into the United States.
An article from The Australian reported that Wilsons analyst James Ferrier said the FDA decision "could suggest US authorities are becoming more comfortable with the supply situation."
Earlier this year, US consumers faced an infant formula shortage following potential contamination at one of its largest manufacturing plants.
Ferrier also went on to add:
This is obviously a disappointing outcome for A2 Milk in regards to short-term earnings potential or an opportunity to build brand awareness in the US.
It also creates uncertainty for those who have secured temporary market access, in relation to prospects for more permanent market access beyond November, which is the end date of the policy.
It is worth noting though that while the update may leave a sour taste in investors' mouths, the revenue outlook remains the same.
Management is expecting to achieve revenue growth this year after reporting a 2.5% decline to $661 million in H1 FY22.
A2 Milk is scheduled to report its full year results on Tuesday 30 August.
Is the A2 Milk share price a buy despite its latest woes?
Despite the setback, a couple of brokers believe that the A2 Milk share price is currently trading at a bargain price.
Wilsons has a market weight rating and a $5.98 price target on the company's shares. Based on the current price, this implies an upside of around 27%.
Furthermore, Morgans believes A2 Milk shares are worth $6.39 apiece according to its last valuation.
While more bullish than Wilsons' price target, this implies an upside of 35% for investors.
