The Treasury Wine Estates Ltd (ASX: TWE) share price has been out of form in 2022.
Since the start of the year, the wine giant's shares are down 11%.
Is the weakness in the Treasury Wine share price a buying opportunity?
While the pullback in the Treasury Wine share price this year has been disappointing, one leading broker sees it as an opportunity for investors to pick up shares.
According to a note out of Citi, its analysts have retained their buy rating and $13.78 price target on the company's shares.
Based on the current Treasury Wine share price, this implies potential upside of 24% for investors over the next 12 months.
What did the broker say?
Citi has been looking over the recent quarterly update from rival Constellation Brands.
While it notes that Constellation Brands has been battling inflationary pressures and expects Treasury Wine to be facing the same headwinds, it remains positive on the company's outlook.
Particularly given its premiumisation strategy, price increases, and the reopening of higher margin channels. These are expected to help offset some of these cost pressures. Citi commented:
"Constellation Brands' 4Q22 result (ending 28 Feb 22) revealed inflationary pressures adversely impacted earnings, with cost headwinds likely to continue in FY23 (ending Feb 23). This is consistent with cost pressures flagged by Treasury at its Feb 22 result.
Based on the Constellation result it is unknown whether the A$5 million to A$10 million headwind relating to 2H22 packaging costs that Treasury flagged at its 1H22 result will be sufficient. Nonetheless, we expect some of these cost pressures Treasury is facing to be offset by price rises of popular wine brands (Constellation also doing this), premiumisation and re-opening of higher margin on premise channels."
