Why is the A2 Milk share price up 46% year to date and at a 52-week high?

This infant formula company's shares have delivered the goods this year.

| More on:
A happy boy with his dad dabs like a hero while his father checks his phone.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The A2 Milk Company Ltd (ASX: A2M) share price is having another positive session.

The infant formula company's shares have risen a further 2% to a new 52-week high of $6.22.

This latest gain means that its shares are now up an incredible 46% since the start of the year.

To put that gain into context, $20,000 invested in A2 Milk shares on 29 December would now be worth $29,200.

Why is the A2 Milk share price on fire?

Investors have been bidding the company's shares higher for a couple of reasons.

One of those was in January, when the company was given a boost from better than expected Chinese birth rate numbers. This bodes well for infant formula demand in the key market.

But the main driver of this gain was the release of its half-year results in February, which impressed the market.

As a reminder, A2 Milk reported a 3.7% lift in revenue to NZ$812.1 million thanks largely to strong growth in the China & Other Asia segment. Its revenue was up 16.5% over the prior corresponding period, which offset a 24.1% decrease in the ANZ segment. The latter was driven by a major change in its distribution strategy.

And with the company's gross margin increasing modestly despite higher input costs, A2 Milk's EBITDA increased by 5% to NZ$113.2 million.

But getting investors excited the most was arguably its outlook statement which accompanied its results. Management revealed that its revenue growth expectations for FY 2024 have improved since its prior outlook statement.

It now expects low to mid single-digit revenue growth for the year compared to just low single digit growth. It also expects its margins to be largely in line with what was recorded in FY 2023.

Ahead of expectations

All the above came in ahead of expectations, which helps explain the rise in the A2 Milk share price.

Commenting on the results, Bell Potter said:

Revenue of NZ$812m was up +4% YOY (vs. BPe NZ$774m). EBITDA of NZ$113.2m was up +5% YOY (vs BPe of NZ$110.2m). EBITDA ex-MVM was NZ$128.5m (vs. BPe of NZ$121.3m). Underlying NPAT of NZ$85.3m was up +16% YOY (vs. BPe of $82.5m).

Is it too late to invest?

As things stand, most brokers believe that the A2 Milk share price is fully valued now.

However, analysts at Ord Minnett still see scope for big returns. They currently have an accumulate rating and $7.40 price target. This implies potential upside of approximately 19%.

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 A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on 52-Week Highs

Arrows pointing upwards with a man pointing his finger at one.
52-Week Highs

7 ASX All Ords shares smashing new 52-week highs on Tuesday

Do you own any of these stocks at new highs today?

Read more »

A person leans over to whisper a secret to a colleague during a meeting.
Share Market News

Here's when ANZ says the first interest rate cut will be

There's been speculation that Australia's first rate cut may be delayed if the United States delays its own.

Read more »

A woman in a business suit sits at her desk with gold bars in each hand while she kisses one bar with her eyes closed. Her desk has another three gold bars stacked in front of her. symbolising the rising Northern Star share price

Would I be crazy to buy Northern Star shares at almost $15?

Is it too late to generate golden returns from this high-flying stock?

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
52-Week Highs

13 ASX 200 shares at 52-week highs

These shares are making their shareholders smile on Thursday.

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
52-Week Highs

These 5 ASX 200 shares just hit new 52-week highs

Do you own any of these five lucky stocks?

Read more »

ETF on white blocks with a rising arrow on top of coin piles.
52-Week Highs

12 ASX ETFs breaking the mould to hit 52-week highs today

What a day for ASX ETF investors!

Read more »

Man sitting in a plane looking through a window and working on a laptop.
Travel Shares

Why is the Webjet share price racing to a 52-week high today?

Webjet has been busy talking up its WebBeds business this morning.

Read more »

Man pointing at a blue rising share price graph.
Financial Shares

Big ASX news: Macquarie share price hits new 52-week high

It's been a great day to own Macquarie shares...

Read more »