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Goldman Sachs Upgrades Bellamy's, Lifts Target Price on A2 Milk


Goldman Sachs has been busy reviewing its ratings and price targets on Australian and New Zealand dairy stocks.

Last week's capital raising by embattled baby formula maker Bellamy's Australia (BAL.AU) has boosted Goldman Sach's confidence in the stock, with the broker removing it from their Australia/New Zealand sell list. Goldman Sachs upgraded the stock to neutral, significantly lifted its earnings per share forecasts, and raised its price target to AUD5.70 a share from AUD3.40 a share before the rights issue:

ON-CD410_CowAni_D_20170522164341.jpg Getty Images

BAL's growth outlook and risk profile has improved significantly in our view as a result of management and board changes, supply shortages at key competitors, the announced acquisition of a Chinese accredited canning facility and supply chain reset with key supplier Fonterra which discharges a material portion of the company's take-or-pay commitments. These changes have alleviated a number of material concerns for us and altered the investment thesis for the stock.

Goldman Sachs also raised its target price on A2 Milk (A2M.Au) by 24% to AUD4.10 after the maker of a more easily digestible milk upgraded its guidance for milk sales in 2017. Goldman Sachs says the guidance implies fourth quarter sales of NZD156.5 million compared to NZD132.4 million in the third quarter.  Goldman Sachs rates the stock a buy - here's why:

As its supply position continues to improve, we believe A2M is well placed to leverage (1) continued growth in the online channel in China (away from traditional offline channels), and (2) continued market share gains (away from traditional incumbents, i.e. Chinese domestic players and more established international brands).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Stocks


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