The Costa Group Holdings Ltd (ASX: CGC) share price is rebounding from yesterday's selloff.
In morning trade, the horticulture company's shares are up over 1% to $3.41.
Why did the Costa share price crash lower on Thursday?
The Costa share price crashed 24% lower yesterday following the release of its annual general meeting update.
Costa revealed that it is expecting its first half performance to be marginally ahead of the prior corresponding period. This is being driven by weakness in its domestic operations and currency headwinds.
Is this a buying opportunity?
According to a note out of Goldman Sachs, its analysts believe the selloff was overdone.
And while the broker has cut its price target by 9% to $4.85, it has held firm with its buy recommendation.
Based on the current Costa share price, this implies potential upside of 42% over the next 12 months.
What did Goldman say?
Goldman said: "CGC has released a trading update at its AGM. Performance across categories has been mixed YTD: international is performing very strongly, but challenges in domestic produce have emerged, particularly in the mushroom operations (labour sourcing) and the Avocado and Tomato categories (price deflation)."
"We see a positive earnings growth trajectory for the company over the medium term driven largely by volume growth from new plantings. However, the challenges observed through this half illustrate the leverage CGC has not only to agricultural conditions (as we saw through 2019), but also to market conditions."
"We think the share price reaction today (-24%) is overdone, and with our revised 12m TP by -9% to A$4.85 providing 44% upside, we retain our Buy recommendation," it concluded.
Goldman made the revision to its price target after reducing its FY 2021/FY 2022/FY 2023 by -22%/-12%/-14%. However, despite these downgrades, the broker still believes Costa can grow its earnings per share by a CAGR of 19% between FY 2020 and FY 2023.
In light of this, with the Costa share price trading at 19x estimated FY 2021, it sees a lot of value here for investors.
