The Treasury Wine Estates Ltd (ASX: TWE) share price has had a difficult time in recent years.
On Wednesday, the wine giant's shares are up 1% to $12.19.
While this means the Treasury Wine share price is almost 35% higher year on year, it is still a long way from its pre-COVID levels of ~$18.00.
Will the Treasury Wine share price ever get back to its pre-COVID levels?
Firstly, it is worth remembering that a lot has changed for the company since COVID-19 hit markets.
For example, late in 2020 the Treasury Wine share price was sold off when it was effectively kicked out of the lucrative China market after regulators slapped extreme duties on its portfolio.
Following an anti-dumping investigation, China's Ministry of Commerce put a duty rate of 175.6% on Treasury Wine's Australian country of origin wine in containers of two litres or less imported into China. This essentially means that a $50 bottle of wine would cost Chinese consumers $137.80 after duties have been applied.
As the China market was a big one for the company, this created a huge gap in its earnings. This makes it much harder for the Treasury Wine share price to reach its previous levels.
But management is certainly working hard to get there and is looking to reallocate this wine to other markets in order to fill the earnings gap. In addition, it recently announced a major acquisition that looks set to boost its earnings in the coming years.
Will it get there?
One leading broker that isn't expecting much from the Treasury Wine share price in the near term is Goldman Sachs.
According to a note this week, its analysts have reviewed its recent acquisition of Frank Family Vineyards and retained their neutral rating and lifted their price target slightly to $11.80. This implies potential downside of 3.2%.
Goldman commented: "We believe that this acquisition remains positively aligned with the longer term portfolio strategy in the Americas and in terms of changing consumer channel preferences. However, we remain conservative in the potential for FFV to become a margin accretive channel for wine currently used in lower margin brands."
"As a result, our forecasts remain conservative vs. the prior 3 year volume CAGR of +7.7% into FY24 and beyond. We update our earnings outlook to include this acquisition, resulting in +1.7% and +3.8% increases to the Group EBITS. In line with management guidance, our forecasts imply that leverage is likely to remain elevated into FY23, before returning to the 1.5x-2.0x range," it added.
