Why the Bubs (ASX:BUB) share price is zooming 7% higher today

This struggling infant formula company’s shares are having a good day…
The post Why the Bubs (ASX:BUB) share price is zooming 7% higher today appeared first on The Motley Fool Australia. –

The Bubs Australia Ltd (ASX: BUB) share price has been a strong performer on Monday.

In afternoon trade, the struggling goat milk focused infant formula company’s shares are up 7% to 44 cents.

Why is the Bubs share price up 7% on Monday?

The catalyst for the rise in the Bubs share price on Monday has been speculation that one of its rivals might be taken over.

The A2 Milk Company Ltd (ASX: A2M) share price is currently up 14% after The Australian suggested that global food giant Nestle was lining up a takeover approach.

The report indicates that Nestle may be waiting for the release of the company’s full year results next week before deciding whether to make a move or not.

However, this isn’t the first time that The Australian has suggested a takeover approach was coming. In April it said the same and no offer was tabled.

Could Bubs be a takeover target?

While you cannot rule anything out, especially given the heightened M&A activity, it is worth noting that A2 Milk and Bubs are two very different beasts.

On one hand, you have A2 Milk which is a highly profitable company going through a very difficult period largely because of COVID-19.

And on the other hand, you have Bubs which has consistently failed to live up to expectations and makes a heavy loss. In fact, during the last quarter, Bubs revealed yet again that it spends more on manufacturing and marketing its products than it receives from the sale of them. This resulted in another quarter of cash burn.

Bubs also doesn’t have a recognisable brand like A2 Milk and little by way of a unique selling point. This arguably doesn’t make it anywhere near as attractive a takeover target as A2 Milk.

Even after today’s strong gain, the Bubs share price is down 54% since this time last year.

The post Why the Bubs (ASX:BUB) share price is zooming 7% higher today appeared first on The Motley Fool Australia.

Should you invest $1,000 in Bubs right now?

Before you consider Bubs, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Bubs wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

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Why Bubs, Mayne Pharma, Paradigm, & PointsBet shares are tumbling lower

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ASX 200 Weekly Wrap: ASX grinds to a halt following new all-time high

Bubs (ASX:BUB) share price on watch after company’s quarterly update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk and BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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