A2 Milk Company Ltd (ASX: A2M) shares have been strong performers this year.
Since the start of 2025, the infant formula company's shares have risen a sizeable 60%.
Does this mean it is too late to invest? Let's see what analysts at Macquarie Group Ltd (ASX: MQG) are saying about the stock following its trading update.
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What is the broker saying?
Macquarie notes that A2 Milk has upgraded its guidance for FY 2026 thanks to stronger than expected performances across all segments. It said:
The increased FY26 revenue outlook (~+3pp) was broad-based across IMF, other nutritionals and liquid milk, while lower NZD was also a contributor – we think roughly half of uplift, while FX benefits will be stronger in FY27.
Another positive is that the company reported a stabilisation in the China market and favourable marriage data. In addition, Macquarie points out the company's opportunity in the Vietnam market, where sales are growing strongly. It adds:
A2M see the China IMF market backdrop as stabilising which has been a positive factor and recent marriage data could be supportive of shallower CY26 birth normalisation, while less impact from supply chain disruption than anticipated has aided guidance. Vietnam was also called out as growing strongly and an attractive opportunity (~$2b market with 1.4m annual births). Some of the newer products including Genesis and fortified Nutritionals are tracking well.
Macquarie also highlights that management has reaffirmed plans to pay a NZ$300 million special dividend. And while the process is taking longer than expected, the broker believes that the more it drags out, the more likely that A2 Milk will pay out even more. It said:
A2M reiterated its intention to declare $300m special dividend subject to approvals in amending the two existing Pokeno CL registrations, and an update is expected in the next 12 months. The longer the timeframe to amend these registrations, the more we see the potential for a larger capital return given FCF generation across the business.
Should you buy A2 Milk shares?
In response to the update, the broker has retained its outperform rating on A2 Milk's shares with an improved price target of $9.50 (from $8.70).
Based on its current share price of $9.21, this implies modest upside of 3.1% from current levels.
Though, with the broker forecasting a 2.2% dividend yield this year and a 6.4% dividend yield the year after, this does make things more attractive.
Commenting on its recommendation, the broker said:
Maintain Outperform while acknowledging valuation is elevated against history, while part of this is reflecting initial Pokeno losses (~4x to FY26 PER). Continuation of strong execution will allow for ongoing momentum, while Pokeno sets A2M up for strong med-long term growth, with reduced risks.
