Shares in Bubs Australia Ltd (ASX: BUB) are down almost 50% over the past 12 months, but if the brokers are to be believed, the shares are about to make a comeback.
Both Bell Potter and Shaw and Partners have released new research reports on the baby formula company, and each is predicting solid share price gains.
I'll get to the specifics of their share price targets shortly. First, let's look at the company's recent full-year report.
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Profits on the rise
Bubs said in its report released this week that full-year revenue had increased 9.2% to $111.9 million, while underlying EBITDA came in at $5.3 million, up from $2.1 million.
Bubs Chief Executive Officer Joe Coote said of the result:
FY26 marked important progress against our growth strategy, delivering revenue growth of 9% and strengthening the foundations for future growth. This was driven by continued momentum in the United States, where revenue increased 24% as we expanded distribution to more than 10,000 stores across targeted retail formats. During the year we rebuilt inventory levels, expanded distribution channels, launched adjacent products, increased brand investment and strengthened our leadership team to support future growth. This progress was achieved despite a challenging operating environment, with changing tariff policies, geopolitical disruption and evolving regulatory requirements increasing supply chain costs and affecting product availability, particularly in the second half.
The company said it expected improved momentum in the first half of FY27, with strong growth expected in the US, growth expected in China supported by expanded distribution and marketing, and continued marketing investment in Australia to accelerate recovery.
The company added:
Gross margin is expected to rebound, with working capital positioned to support the anticipated growth.
Bubs Australia shares looking cheap
Shaw and Partners said the results were largely in line with expectations, and the current year would be driven by growth in the US.
They said:
Our key investment thesis remains centred on the US business, where revenue grew 24% to $65.8 million and distribution expanded to over 10,000 stores, while management expects growth and margin recovery in FY27 as regulatory and tariff headwinds ease and permanent FDA approval progresses. Following the result, we have reduced our DCF valuation from $0.16/s to $0.15/s, reflecting forecast revisions and model roll-forward, but maintained our buy rating given the forecast 74% total shareholder return potential and confidence in the company's medium-term growth outlook.
Bell Potter has a price target of 13.5 cents on Bubs shares, compared to 8.6 cents currently.
Bubs is valued at $76.9 million.
