It has been another disappointing day of trade for the Treasury Wine Estates Ltd (ASX: TWE) share price.
In afternoon trade the wine company’s shares are down a sizeable 5.5% to $14.15.
This decline means the Treasury Wine Estates share price is down 30% since peaking at $20.20.
Why is the Treasury Wine Estates share price sinking lower today?
Investors have been hitting the sell button in a hurry this morning after one of its rivals released a disappointing trading update in the United States.
U.S. rival Constellation Brands saw its share price fall a massive 12% after it advised of weak wine sales in its third quarter.
According to its SEC filing, wine sales grew just half a percent in the third quarter to US$670.3 million.
On the company’s conference call, courtesy of CNBC, President and COO Bill Newlands advised that it has faced challenging conditions at the lower of its wine business, where sales have been “flat or down.”
Investors appear to believe that Treasury Wine Estates could be struggling and may fall short of expectations in FY 2019.
In addition to this, a broker note out of Citi this morning declared the company’s shares as a sell with a $14.50 price target. It felt the update from Constellation Brands was mixed for Treasury Wine Estates.
Citi also continues to believe that the company’s sales will slow beyond FY 2019 despite the strong momentum that has been exhibited in the China market.
Should you buy the dip?
While Constellation Brands’ update was very disappointing and could spell bad news for Treasury Wine Estates, I think this has been priced into its shares now.
As a result, I would sooner be a buyer than a seller of its shares, especially if trade talks between the United States and China go well. If China’s economy continues its solid growth then I expect demand for the company’s wine in the massive market will grow strongly, underpinning its overall growth.
5 stocks under $5
We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of A2 Milk. 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.
- 3 of the best ASX growth shares to buy for the 2020s – July 4, 2020 3:16pm
- 3 top ASX dividend shares I would buy next week – July 4, 2020 10:33am
- These were the best performing ASX 200 shares last week – July 4, 2020 10:02am