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.
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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.
