MENU

Why Treasury Wine Estates Ltd shares have fallen 10% lower today

In morning trade the Treasury Wine Estates Ltd (ASX: TWE) share price has been amongst the worst performers on the market.

At the time of writing the wine company’s shares are down almost 10% to $16.28.

Why are Treasury Wine Estates’ shares sinking lower?

This morning the company released an announcement responding to media reports in the AFR alleging that it is faced with a supply glut of its own making in China.

The report suggests that distributors in China are sitting on upwards of three years’ worth of low-end stock. These include brands such as Rawson’s Retreat, Wolf Blass, and a selection of cheaper Berringer products. This is believed to have led to deep discounting by wholesalers and retailers in China.

However, Treasury Wine Estates has stated that it is “comfortable with the sustainability of its operating model in China, to build a portfolio of brands, and of its disciplined approach to managing inventory levels with its customers.”

Before warning that investors should be careful about listening to feedback from selected customers in China.

This is because the company’s “disciplined and rigorous approach to working with customer partners to sell a portfolio of TWE’s wines, as it does in every region around the world, may underpin motivations for underperforming customers, who are not growing with the Company, to comment publicly.”

However, unrelated to this, management has confirmed that it is experiencing a slowdown on the clearance of imports into China and delays for some of its Australian Country of Origin shipments being cleared by the General Administration of Customs China to replenish its inventory levels.

This has been caused by new and additional verification requirements which came into place last month. Pleasingly, the company doesn’t believe this slowdown will be a long-term issue.

Should you buy the dip?

As we saw with A2 Milk Company Ltd (ASX: A2M) yesterday and WiseTech Global Ltd (ASX: WTC) in February, growth shares that trade on nosebleed valuations will often plunge notably lower if their growth fails to live up to expectations.

Because of this, I can’t say I’m overly surprised to see its shares drop lower today on the back of these reports. However, I do think that the level of decline could be an overreaction, which could make this a buying opportunity for investors. Though it may be best to let the dust settle first.

In the meantime, these growth shares could be great options for investors.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk and WiseTech Global. The Motley Fool Australia has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now