Bubs shares boost to US baby formula rescue mission (ASX:BUB)

bubs australia [ASX:BUB] rose 77% on Monday after the signing of an emergency supply agreement to alleviate the shortage of infant formula in the United States.

bubs australia [ASX:BUB] don’t waste a crisis.

The company has reached an agreement to supply the United States with cans of infant formula as the country continues to suffer from an infant formula shortage.

The surge in share prices has lifted BUB shares to a level not seen since November 2020.

Infant formula stock is now up 105% over the past 12 months:

Source: TradingView.com

Bubs to help the formula crisis in the United States

Bubs today announced that the US FDA has authorized the immediate importation of Bubs infant formula into the United States in an effort to address its severe infant formula shortage.

The U.S. infant formula market has been under pressure since February due to supply chain issues and a massive recall hitting a major retailer.

More than 20% of powdered baby formula was out of stock in early May as manufacturers rushed to ramp up production.

As The the wall street journal reported:

There are several reasons for the shortage. Supply chain issues caused by the Covid-19 pandemic have made infant formula harder to find for months.

The shortage worsened after Abbott Laboratories, a major formula maker, voluntarily recalled some products and closed a plant in Sturgis, Michigan, where Similac and its other brands were made.

Panic buying as news of the shortage spreads can also be a problem.

The shortage has prompted authorities to act, even US President Biden has addressed the crisis.

Bubs ended up being part of emergency measures.

Source: Twitter

Bubs and the FDA reach an agreement

Now, Bubs’ products already meet the nutritional needs of infants in the United States. The company has already had a retail presence in the United States since June 2021.

But the recent FDA approval will expedite the importation of Bubs’ formula.

Bubs said it has pledged to supply at least 1.25 million boxes in the coming weeks and months (equivalent to at least 27.5 million bottles).

500,000 boxes are ready for immediate shipment to the United States. The production of the remaining 750,000 boxes has been planned and should be completed in the coming months.

BUB said its products are made in an FDA-registered production facility, which is capable of tripling the current annual capacity of 10 million boxes.

Bubs CEO Kristy Carr said:

As Australia’s leading infant nutrition specialist, we welcome the opportunity to support American families in this time of need and provide an immediate source of sale, a reliable and clean line of infant formula.

Australia and the United States have relied on each other in times of crisis for over 100 years. This is no different and all credit goes to the US government for encouraging initiatives that allow us to respond and help. Bubs is uniquely positioned with a nationwide sales and distribution footprint, allowing us to quickly stock the shelves of existing and potential retail partners..’

Executive Chairman Dennis Lin added:

Bubs identified the United States as a strategic key market two years ago, and our commitment to investing has fortunately coincided with a time of need for American families. This allows us to accelerate our strategic vision as well as provide support that goes to the heart of Bubs’ DNA..’

BUB Share Price Outlook

Some questions emerge.

First, what happens when U.S. infant formula makers resolve their supply chain and recall issues and normal production resumes?

How will this affect Bubs in the long term?

Second, will the emergency importation of the Bubs formula allow the company to secure customers for life?

Will this emergency measure help Bubs to sustainably capture market share from its local American rivals?

And finally, what will be the financial windfall for Bubs? Will it have a significant effect on its financial results?

The next few months will be revealing.

With ongoing supply chain issues, rising interest rates and recession fears, now may not be the time to be looking for investment opportunities right now.

But as the surge in BUB stock prices shows, opportunities still exist, even in today’s markets.

The trick is knowing where to look…and acting before the herd.

How do you do this?

Callum Newman, our small cap expert, has a strategy of selecting “left for dead” stocks that are likely to rebound strongly on market rates.

For more on Callum’s “grave-dancer” stocks, click here.

Cheers,

Kiryll Prakapenka,
For silver morning

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