Why Bellamy’s Share Price Climbed 34% in a Week

At time of writing, Bellamy’s Australia Ltd [ASX:BAL] shares are up 6.83%, at a price of $10.63.

This time last week, Bellamy’s shares were down to $7.80 at one point, their lowest price since October 2017.

But in this past week, the organic baby food and formula producer managed to climb 34%.

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What caused Bellamy’s share price surge?

The most recent update we’ve had from Bellamy’s was their poor half-year results.

1H19 saw a 25.9% decline in revenue to $129.6 million, a 59.9% drop in EBITDA to $13.9 million, and a 63.7% decline in net profit after tax to $8.1 million.

The company blamed delays in SAMR registration (State Administration of Market Regulations) approval for the unimpressive results, having cost Bellamy’s an estimated $18 million. Rebranding set them back another $10 million.

And yet, Bellamy’s has warned that a worse than expected hit is in store for the company’s full-year result.

With no other news to say otherwise, it’s unsure what has sparked this week-long surge.

But according to the Sydney Morning Herald, around 10.4% of Bellamy’s shares are currently held short, which could indicate that short sellers are buying back shares to close their positions.

According to data from ASIC and Bloomberg, five times more shares are being held short than the daily average volume of traded shares.

And at time of writing, the volume of Bellamy’s shares traded today sits at around 4 million, which is notably higher than the daily average of around 2.27 million.

What this means for Bellamy’s

While a high amount of shorted shares doesn’t point a company towards future growth, an improvement in market access can.

And with the possibility of soon acquiring the SAMR accreditation, Bellamy’s could soon have the freedom to sell its Chinese-labelled products on the mainland.

Furthermore, the company’s rebranding efforts included engaging Chinese celebrity singer Stephanie Sun and former Miss World Zilin Zhang to help market their products.

But we are yet to find out if Bellamy’s will indeed receive this accreditation.

Regards,

Ryan Clarkson-Ledward
For Money Morning

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