The A2 Milk Company Ltd (ASX: A2M) share price is slightly in the red this year but could now be the time to buy?
A2 Milk shares have shed 2.38% since market close on 31 December. In today's trade, they are up 0.95% at the time of writing, fetching $5.32 apiece. For perspective, the S&P/ASX 200 (ASX: XJO) is up 1.2% so far today.
Let's check the outlook for the A2 Milk share price.
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What's ahead?
The A2 Milk Company will be holding its AGM on Friday 18 November in Auckland, New Zealand. In FY22, the company reported a 42.3% lift in net profit after tax (NPAT) to $114.7 million. Group revenue jumped 19.8%.
The team at Bell Potter has recently maintained a buy rating on A2 Milk shares with a $6.60 price target. This represents a 24% upside on the current A2 Milk share price.
Bell Potter provided this outlook based on infant milk formula (IMF) data and the weak New Zealand dollar. Analysts said:
Total landed IMF volumes (traditional + bonded volumes) into China were up +22% YOY in Aug'22 and are up +14% YOY on a R3M basis. China landed volumes found a floor in Apr'22 and have been improving since.
In the near term directionally favourable YOY trends look to have returned to shipment indicators of IMF to China and the NZD weakness is creating a tailwind, given the majority of sales occur in AUD, USD and CNY.
Perpetual Equity Investment Company (ASX: PIC) also predicted "material upside" for the A2M share price following the company's FY22 results.
However, Fairmont Equities managing director Michael Gable put a "hold" recommendation on A2 Milk shares in September. He highlighted the company's strong result in FY22 but raised some concerns about market conditions. He said, cited by The Bull:
…market conditions remain challenging due to increasing competition and a low birth rate in China. Consequently, we view the company as currently trading around fair value. We retain a market weight rating.
Share price snapshot
The A2 Milk share price lost 19% in the past year, while it has fallen nearly 4% in the past month.
For perspective, the ASX 200 has lost more than 8% in the past year.
A2 Milk has a market capitalisation of nearly $4 billion based on the current share price.
