Treasury Wine Estates Ltd (ASX: TWE) shares took a beating on Thursday.
The $8.5 billion blue chip ASX stock ended the day almost 6% lower at $10.51 after a solid half year result was overshadowed by softer than expected full year guidance.
This means its shares are now down 19% from their 52-week high.
Has this pullback created a buying opportunity for investors? Let's see what analysts at Goldman Sachs are saying about the wine giant.
What did the broker say about the result?
Goldman wasn't surprised to see Treasury Wine's shares fall on Thursday given its guidance for FY 2025. It said:
Despite an in-line 1H25 results, we believe that the market will be disappointed by the company's updated group EBITS guidance towards the low end of previous guided range at A$780mn vs GSe FY25 A$784mn and VA Cons A$796mn. This implies that 2H EBITS of ~A$389mn, or ~5.5% YoY, which is likely to be below expectations of the market assuming currency benefit in 2H25.
Commenting on the performance of the key Penfolds business, the broker said:
TWE sold a record A$551mn in 1H25 on China re-entry. That said, the company retained its FY25 guidance of low-double digit EBITS growth, implying on our updated forecasts 2H25 revenue -7% YoY and EBITS -6% YoY vs 2H24 China re-entry. Mgmt noted that 2H25 Penfolds sales are supply constrained, though we remain cautious with channel checks suggesting 1) noticeable Bin389 retail prices discounts in Jan/Feb 2025 despite TWE increasing Bins/Icons prices by ~6% from July 2024; and 2) still widely available parallel import prices at 30-40% discounts to official China label prices.
However, despite this, Goldman is sticking with the company and believes the blue chip ASX stock is a good option for investors with major upside potential and a generous yield.
Buy this blue chip ASX stock
In response to the result, the broker has retained its buy rating with a slightly trimmed price target of $12.90 (from $13.00).
Based on the current Treasury Wine share price of $10.51, this implies potential upside of 23% for investors over the next 12 months.
In addition, the broker is forecasting a 4% dividend yield in FY 2025. This boosts the total potential 12-month return to 27%.
Commenting on its buy recommendation, Goldman said:
Net net, we remain Buy at A$12.9/sh TP implying 27% TSR. TWE is trading at FY26 P/E of ~15x, which is inexpensive relative to our Consumer coverage. If TWE is able to demonstrate added comfort to the market on its Penfolds channel sell-through and sustained US luxury portfolio growth, we expect the stock to re-rate positively.
