It's been a sobering (sorry, I had to!) couple of years for Treasury Wine Estates Ltd (ASX: TWE).
At its peak just over two years ago, the company's share price traded at over $14. Today, it sits at $7.91, below even its COVID lows, and investors are still waiting for a full-bodied recovery.
So, how much upside does Macquarie see from here?
Well, not a whole lot.
Macquarie analysts currently have a Treasury Wines 12-month price target of $8.50, implying an upside of about 7.5% and total shareholder returns of 11.4% when dividends are included.
That's decent, but not enough to earn the strong buy label. The broker is sticking with its neutral rating, citing mixed fundamentals and uncertainty around execution. Let's examine what's going on, starting with the good news.
The good news: Share buyback, brand strength, and Penfolds
There are a few bright spots.
Macquarie sees the company's planned 5% share buyback as a positive signal, and it estimates that when completed, the share buyback could lift earnings per share by 3.5% on an annualised basis. Share buybacks (all else equal) reduce the company's total shares outstanding, with the effect of increasing earnings per share (assuming earnings also don't slide backward).
Penfolds (the crown jewel in Treasury Wines' portfolio) remains the business's growth engine, and management is investing heavily to further establish the brand in the key China market. Macquarie sees this as a short-term trade-off for potential long-term gains in that market, noting that management has lowered their short-term target profit for Penfolds (due to the brand-building investment) while maintaining the long-term target.
The not-so-good news: Patchy performance elsewhere
Outside of Penfolds, the business is still working through some hangovers.
Growth in the Americas hasn't been sparkling, with the Americas division guiding for only "modest" earnings growth in FY26. Treasury Collective (the lower-end wine brands) is expected to keep shrinking, albeit at a slower rate. Macquarie expects a top-line decline for Treasury Collective in FY26.
Foolish Takeaway
Based on Macquarie's estimates, Treasury Wine isn't broken but is not in top shape either. The Penfolds brand is strong, and the buyback is a vote of confidence, but the rest of the business is still finding its footing.
Macquarie's $8.50 target implies there's a bit of upside, especially when you factor in dividends. Still, this isn't a bargain-bin value stock, nor a high-growth compounder. It's somewhere in between.
The wine may still age well with time, but for now, Macquarie's letting it breathe.
