Why is this ASX All Ords share zipping 10% ahead today?

Investors are scrambling to buy this share on Monday. But why?

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A young female ASX investor sits at her desk with her fists raised in excitement as she reads about rising ASX share prices on her laptop.

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The ASX All Ords index may be trading lower on Monday, but that hasn't stopped the Baby Bunting Group Ltd (ASX: BBN) share price from zipping higher.

At the time of writing, the baby products retailer's shares are up 10% to $2.30.

Why is the Baby Bunting share price racing higher?

Investors have been bidding this ASX All Ords share higher today after a number of brokers responded positively to the company's FY 2023 results.

One of those brokers was Morgans, which this morning has upgraded Baby Bunting's shares to an add rating with a $2.50 price target.

Its analysts have increased their earnings estimates to reflect lower costs and a better sales outlook. The broker said:

Baby Bunting Group's FY23 earnings result was in line with the pre-release. A 51% fall in NPAT was a function of an overrunning cost base, LFL sales decline and investment in growth. We increase our NPAT estimates by 17% in FY24 and 7% in FY25 as a result of cost-out initiatives and higher sales assumptions.

Elsewhere, analysts at Citi aren't as excited but have increased their valuation materially. The broker has retained its neutral rating and lifted its price target to $2.20 (from $1.65).

Citi also highlights the company's cost reductions as a reason to be positive. However, it believes investors should sit on the fence until the ASX All Ords share demonstrates a clearer strategic direction. It said:

While sales continue to trend negatively, the comps get easier to cycle throughout 1H24 and the cost out should provide some buffer against operating deleverage. The Australian rollout is likely to slow in the short term as the business seeks better rental deals. We need greater certainty around the strategic direction when the new CEO starts in October 2023 to turn more positive. We see the stock fairly priced at 16x FY24E PE given the elevated uncertainty around the consumer and questions around how non-discretionary this category is.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 no position in any of the stocks mentioned. 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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