The Treasury Wine Estates Ltd (ASX: TWE) share price is falling on Wednesday.
In late morning trade, the wine giant's shares are down 1% to $10.49.
What's going on with the Treasury Wine share price?
Investors appear to have been hitting the sell button today amid reports that the company could be facing strike action from employees.
According to reports in The Australian, workers plan to strike for 24 hours in support of a 14% pay rise.
This has offset some positive news in relation to its recent US acquisition.
According to an announcement out of the company today, it has now successfully completed the acquisition of DAOU Vineyards and its associated entities for US$900 million.
The acquisition is effective from today and the owners of DAOU have been issued shares to the value of US$100 million. These shares are subject to voluntary escrow arrangements, with 50% of the shares being released from escrow after one year, and the remaining 50% being released after two years.
Should you invest?
Analysts at Morgans see a lot of value in the Treasury Wine share price.
They currently have an add rating and a $14.15 price target on its shares. This implies a potential upside of approximately 35% for investors over the next 12 months.
The broker also expects a 3.5% dividend yield in FY 2024. This boosts the total potential return beyond 38%.
Its analysts recently commented:
It may take some time for the market to digest TWE's acquisition of Paso Robles luxury wine business, DAOU Vineyards (DAOU) for US$900m (A$1.4bn) given it required a large capital raising. The acquisition is in line with TWE's premiumisation and growth strategy and will strengthen a key gap in Treasury Americas (TA) portfolio. Importantly, DAOU has generated solid earnings growth and is a high margin business. It consequently allowed TWE to upgrade its margins targets. While not without risk given the size of this transaction, if TWE delivers on its investment case, there is material upside to our valuation. The key near term share price catalyst is if China removes the tariffs on Australian wine imports.
