Is the current Treasury Wine (ASX:TWE) share price a bargain?

Is it time to buy this wine giant’s shares?

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a group of people clink wine glasses in an outdoor, late afternoon setting.

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The Treasury Wine Estates Ltd (ASX: TWE) share price certainly has returned to form in 2021.

Since the start of the year, the wine company’s shares have rallied an impressive 28% higher.

Can the Treasury Wine share price keep rising?

Despite this strong rise, one top broker believes the Treasury Wine share price can still go even higher.

According to a recent note out of Morgans, its analysts have retained their add rating and increased their price target on the company’s shares to $14.01.

Based on the current Treasury Wine share price of $12.25, this means potential upside of 14% over the next 12 months.

What did the broker say?

Morgans was pleased with the company’s performance in FY 2021 and appears positive on the future.

It notes that the company is targeting sustainable revenue growth and significant wider margins.

And while Morgans acknowledges that there are risks to the reallocation of its wine from China, it isn’t overly fazed. Especially given the impressive performance of its US business, which is bouncing back from the pandemic much quicker than it was expecting.

It commented: “TWE has the China reallocation risk and it will take 2-3 years to recover these earnings in new markets. However, outside of China, its key markets, particularly the US, are recovering faster than expected from COVID.”

In addition to this, the broker highlights the company’s restructuring and believes the Treasury Wine share price is undervalued based on a sum of the parts (SOTP) valuation.

Morgans explained: “The new business units centred around the brands, are now fully in place and we are excited to see what they can earn with TWE effectively creating the benefits of a demerger without the extra costs. It also demonstrates that the SOTP is worth materially more than the whole.”

“It shines a light on Penfolds and its best-in-class margins and may ultimately lead to corporate activity in some form in the future. We rate this management team highly,” it concluded.

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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 owns shares of and 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 Bruce Jackson.

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