Bubs Australia Ltd (ASX: BUB) shares soared on Monday this week when the company announced it had secured approval to supply the US market with its infant formula products.
Bell Potter has since upgraded its price target on the company, and the analyst team believes there's about 46% more upside in the shares as a result of the announcement.
I'll get to their exact share price target on the stock shortly.
First, let's look in some more detail at what the company announced this week.
Image source: Getty Images
Key US approval is in the bag
Bubs said in a statement to the ASX that it had secured permanent US Food and Drug Administration (FDA) approval for its Bubs Goat, Bubs 365 Day Grass Fed, and Bubs Essential infant formula products.
The company said the authorisation confirms that Bubs products, manufacturing systems, and scientific evidence satisfy US regulatory requirements for safety, nutritional adequacy, and quality.
The company added:
The United States infant formula market is one of the most highly regulated consumer categories globally, with substantial scientific, regulatory and manufacturing requirements for entry. Permanent FDA authorisation strengthens Bubs' competitive position as the only Australian infant formula brand and one of a limited number of international manufacturers able to participate in this market. The approval provides a foundation for continued growth across Bubs' branded portfolio while creating strategic optionality for future product innovation and market expansion.
Bubs Managing Director Joe Coote said it was a "transformational milestone" for the company.
He added:
This approval provides the platform to accelerate our US growth strategy, deepen retailer partnerships, strengthen consumer awareness of the Bubs brand and expand consumer reach across a market where we are already represented in more than 10,000 stores nationwide. Importantly, it also creates additional opportunities to broaden our product offering and evaluate participation in the US private label infant nutrition segment. While any private label expansion remains subject to further regulatory, technical and commercial milestones, the FDA authorisation represents a significant strategic asset that we consider enhances Bubs' long-term growth potential.
Bubs Australia shares looking cheap
Bell Potter said in a research note to clients that the authorisation was a "material derisking event" for Bubs.
The broker added:
It has been overhanging the stock for some time and is now resolved. Our forecasts already assume ongoing US market access, but having gained USFDA approval, there may be a pathway to accelerate distribution point expansion beyond current projections.
Bell Potter has increased its price target on Bubs Australia shares from 13.5 cents to 19 cents, comparted to the current price of 13 cents.
Bubs is valued at $89.4 million.
