Insights

Broker tips the Treasury Wine share price to pop 23% higher

Here’s why this wine giant could be in the buy zone…
The post Broker tips the Treasury Wine share price to pop 23% higher appeared first on The Motley Fool Australia. –

The Treasury Wine Estates Ltd (ASX: TWE) share price has come under pressure in 2022 amid the market volatility.

Since the start of the year, the wine giant’s shares have fallen 11% to $11.15.

This compares to a 6.2% decline by the S&P/ASX 200 Index (ASX: XJO) over the same period.

Is the weakness in the Treasury Wine share price a buying opportunity?

According to a recent note out of Citi, its analysts see a lot of value in the Treasury Wine share price at the current level.

In response to an update out of an industry peer in the United States, the broker has retained its buy rating and $13.78 price target on the company’s shares.

Based on the current Treasury Wine share price, this implies potential upside of over 23% for investors over the next 12 months.

What did the broker say?

Citi highlights that Pernod Ricard has just released its third-quarter update which revealed that its US sales momentum is accelerating.

While acknowledging that Pernod Ricard’s strong sales momentum was from non-wine brands, it is interpreting the update as a sign of strong demand for alcohol as a whole in the key market.

Citi believes that this bodes well for the Treasury Americas business, which contributes almost a third of its overall earnings.

One slight negative, though, was that Pernod Ricard spoke about challenges in the China market due to lockdowns. Citi has concerns that this could be a risk for any Treasury Wine products arriving into the country through the grey channel.

The broker commented:

Pernod Ricard’s 3Q FY22 result (Mar 22 ending) revealed an acceleration in US sales momentum driven by strong demand in key brands. While the brands highlighted by Pernod were mostly non-wine brands, we see strong alcohol demand in the US post reopening, particularly in the on-premise channel, as a positive for Treasury Americas (~30% of FY22 EBITS). However, challenges in China as highlighted by Pernod due to lockdowns could be a risk for Treasury’s wine volumes which may be landing in China through the grey channel.

The post Broker tips the Treasury Wine share price to pop 23% higher appeared first on The Motley Fool Australia.

Should you invest $1,000 in Treasury Wine right now?

Before you consider Treasury Wine, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Treasury Wine wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Broker names 2 of the ‘best’ blue chip ASX 200 shares to buy now
Broker names the best ASX shares to buy right now
The Treasury Wine share price has tumbled 9% in 2022, so is the dividend yield worth its weight?
Can the Treasury Wine share price recover from its post-China hangover?
2 ASX shares ripe to buy at current prices: expert

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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