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The Bubs Australia Ltd (ASX:BUB) The stock price came under pressure on Tuesday.
Shares of the infant formula company fell 5% to end the day at 57.5 cents.
Investors were selling Bubs shares in response to the release of its annual results.
What’s next for the Bubs stock price?
Bell Potter is one of the top brokers who believe Bubs’ stock price will rise from here.
According to a note this morning, the broker has upgraded the company’s shares to a speculative buy rating with an improved price target of 80 cents.
Based on the latest Bubs share price, this implies a 39% upside potential for investors over the next 12 months.
Why is Bell Potter bullish?
Bell Potter’s upgrade has less to do with the company’s bottom line and more to do with the future.
He believes Bubs has an opportunity to fill a void left by A2 Milk Company Ltd (ASX: A2M) following its change of focus in China. If all goes according to plan, the broker suspects that Bubs could grow its gross income from $104.2 million in fiscal 2022 to more than $400 million by fiscal 2026.
The broker explained:
We are raising our rating from Hold, speculative risk to Buy, speculative risk. In our view, the rapid and conscious shift in sales mix from A2M to direct China (PRC + CBEC) is creating a void in the IMF product offering to large Daigou domestic buyers in the same vein as when Danone undertook a similar strategy in 2HCY18. We expect BUB to benefit from this move given its domestic distribution partners. Longer term, we see BUB as a high-cap IMF play, with the potential to be a $400m+ gross revenue business by FY26 if it successfully executes its growth strategies. growth in the United States and China.