The Treasury Wine Estates Ltd (ASX: TWE) share price is pushing higher on Wednesday.
In morning trade, the wine company's shares are up over 1% to $10.48.
Despite this gain, the Treasury Wine share price is still down over 20% from its 52-week high.
Is the Treasury Wine share price good value now?
While the Treasury Wine share price may be trading well off its highs, one broker that doesn't believe it is good value is Goldman Sachs.
According to a note released this morning, the broker has retained its neutral rating and $9.30 price target.
This price target implies potential downside of 11% over the next 12 months.
What did Goldman say?
Goldman Sachs notes that China's Ministry of Commerce (MOFCOM) has put tariffs on Australian wine for the next five years.
In response to this, the broker has now revised its earnings forecasts to factor in the five-year tariff impact.
Goldman commented: "We revise EBITS forecasts by -6.6% and -9.1% respectively over FY22 and FY23 translating to a -8.1% and -10.9% impact at the NPAT level. We expect the group to maintain dividend payout at c. 65% in the short term."
Based on this, it currently estimates that the company's shares are changing hands at 26x estimated FY 2022 earnings. Which it appears to see as a bit rich given its uncertain outlook.
Why did its price target remain the same?
Although the earnings revisions have resulted in a reduction in its fundamental valuation, this has been offset by an increase in Goldman's M&A rank. This is essentially the likelihood of the company being taken over.
It explained: "These earnings revisions result in a fundamental valuation revision to A$8.65 vs. A$9.30 previously. However, we raise our M&A rank on the stock to 2, and introduce a 15% weighted M&A valuation to our TP. Overall, our 12 month TP remains unchanged at A$9.30. We maintain our Neutral rating on TWE."
