Craigs Investment Partners analyst Stephen Ridgewell retained an overweight rating on a2 milk but lowered the target price 1.2% to $5.69 on slightly lower earnings estimates.
The stock last traded up 1.7% at $4.22.
In August, Craigs upgraded a2 Milk despite a tough near-term outlook and said "post a2 Milk's trading update, and incrementally positive data flow, we have increased conviction in our call".
Ridgewell said the company has "executed superbly" in China and "we believe the company's multi-brand strategy is the right one to continue gaining share and birth rates are set to improve in 2024, so share growth can translate to sales/earnings growth".
He noted the company reiterated at this week's annual meeting that it is expecting "low single-digit revenue growth" in the 2024 financial year.
Ridgewell said investors had been worried about the prospect of a downgrade, partly due to soft guidance from supplier Synlait Milk – which has said its a2 Milk-linked infant formula volumes would fall by 11% in the 2024 financial year.
Ridgewell said while a2 Milk didn't provide 2024 first-half guidance, he does expect a combination of lower sales and cost increases to see earnings down on the prior period.
However, "we expect sales and earnings to improve from 2H24," he said.
