The A2 Milk (ASX:A2M) share price is up 5% in 5 days. Can it go higher?

The A2 Milk Company (ASX: A2M) share price is now up by around 5% in 5 trading days. Is this a recovery, or are A2M shares stuck in the mud?
The post The A2 Milk (ASX:A2M) share price is up 5% in 5 days. Can it go higher? appeared first on The Motley Fool Australia. –

growth in dairy ASX share price represented by smiling cow

A2 Milk Company Ltd (ASX: A2M) shares are not having a fantastic day today. At the time of writing, the A2 Milk share price is down 0.55% to $7.18. That contrasts with the broader S&P/ASX 200 Index (ASX: XJO) which, presently, is essentially flat with a decline of 0.02%.

But zooming out, and the picture looks a little better for A2 Milk. One could arguably even say it looks as though the embattled dairy company may have found a share price bottom after a disastrous few months.

A2 shares bottomed out last week when they hit a new multi-year low of $6.83 a share last Tuesday. That’s the lowest share price that A2 has experienced since October 2017. It also represents a fall of more than 64% from the company’s 52-week (and all-time) high of $20.05 that we saw back in July last year.

That bottom was the culmination (at least until today) of a series of bad news items for the A2 Milk share price. These mostly revolve around the collapse of the Chinese sales channels known as daigou.

Daigou sales are where customers buy products in bulk in order to ship them to China for resale. They were a very popular and lucrative channel for A2 – at least until the coronavirus pandemic came along. Together with the effects of the deterioration of Sino-Australian relations over the past year or so, demand from this side of the Chinese market has all but dried up.

This is a big deal for A2, which reported a 16% slump in revenues in its last earnings report, largely as a result of the daigou issue.

But since last Tuesday when the A2 share price hit this low, the company has rebounded rather enthusiastically. On the current share price, the gains since Tuesday are clocking at 5.1% which is a pretty sturdy recovery. So have we indeed found the bottom for A2?

Are A2 shares a buy today?

Despite the low share prices we are still seeing for A2 Milk, it still doesn’t have too many fans. As my Fool colleague James reported last month, broker Morgans has a ‘hold’ rating on A2, with a price target of $8.24. Citi is less optimistic, with a ‘sell’ rating and a price target of $7.15. So clearly, some brokers don’t have rose-tinted glasses on this one.

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Motley Fool contributor Sebastian Bowen owns shares of A2 Milk. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The A2 Milk (ASX:A2M) share price is up 5% in 5 days. Can it go higher? appeared first on The Motley Fool Australia.

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