Bubs share price: where next following US expansion announcement?

Bubs share price in focus

The Bubs share price (ASX: BUB) rose as much as 31% on Friday after the infant formula company announced it would be expanding into the US market.

Bubs finished out the session at 48 cents per share, up 29.33% for the session.

The $5 billion opportunity

According to the company, the US Infant Formula and Toddler Formula market is worth some USD$5.1 billion, with the majority of those sales made up of powder formulas.

With such a substantial opportunity, this move and the reaction from the market should hardly come as a surprise.

Looking at the practicabilities of this expansion, Bubs said it would first be launching two products in the US – the Aussie Bubs Australian Goat milk Toddler Formula and the Aussie Bubs Grass Fed Nutritional milk Toddler Formula.

These products are set to be launched on Walmart.com – the e-commerce platform of the $385 billion retail giant – from September 2021 onwards.

In addition to Walmart, the company noted it would be expanding its Aussie Bubs range onto Amazon’s North American site.

From a legal perspective, the company said it would establish a US subsidiary – Aussie Bubs Incorporated.

Commenting broadly on this announcement, Bubs CEO, Kristy Carr said:

'We are delighted to announce this important milestone in our continued implementation of our export diversification strategy, as we look for key global markets in which to expand our now award-winning Clean Label formulations.'

By comparison, the Bubs Executive Chairman, Dennish Lin commented:

'As Australia's largest producer of goat dairy products built on our unique vertically integrated business model and deep understanding of the specialty goat dairy supply chain, we are well placed to take advantage of continuing opportunities to expand our global footprint for the Bubs range.'

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Revisiting the Q3

Today's US expansion announcement builds on a strong period of growth from the infant formular company, with Bubs reporting solid top-line gains during the third quarter of fiscal 2021.

At the time Bubs said it had booked gross Q3 revenues of $11.8 million, implying a year-on-year growth rate of 62%, while also informing the market that the business remained well capitalised, with $36.3 million in cash reserves on its balance sheet at the time.

With infant formula stocks being roiled by daigou issues over the last year, the market will likely be keen to see Bubs maintain these growth levels when it releases its upcoming FY21 Q4/ full-year report.

With no official release date set, it should be noted that Bubs released its FY20 Q4 Activities Report on July 27, 2020.