Treasury Wine Estates Ltd (ASX: TWE) shares were in focus yesterday after management withdrew guidance.
The news sent the Treasury Wine share price 14% lower.
Following this sharp decline, the ASX 200 stock now sits nearly 50% lower than it was a year ago.
Investors may be wondering whether this is an opportune time to buy Treasury Wine Estates shares in the dip.
Let's investigate.
What happened?
As covered by the Motley Fool's Bernd Struben, management released an update yesterday that reversed course on guidance previously issued in its FY25 result.
Specifically, management had previously guided for low-to-middle-double digit growth in earnings before interest and tax and significant items (EBITS) in FY26 and around 15% EBITS growth in FY27 for its Penfolds segment.
The company had also projected "modest" EBITS growth for its Treasury Americas business.
However, yesterday, to investors' surprise, that guidance was withdrawn.
In the same announcement, management also notified the market that it was pausing its share buyback program until there is greater clarity surrounding trading conditions.
This news resulted in a major sell-off.
Should investors buy in the dip?
Following the announcement, Macquarie Group Ltd (ASX: MQG) released new research covering this development and updating its price target.
Commenting on management's decision to withdraw guidance, the broker said:
We had previously noted downside risk to guidance based on our crush model, however the incremental disappointment has come from: i) Softer performance in the US as the distributor transition in California is managed; and ii) ongoing weak depletions in China.
We now forecast a ~1% decline in Penfolds EBITS in FY26E, followed by ~11% growth in FY27E. This results in a 6.5% decline in group EBITS in FY26E, followed by 7.9% growth in FY27E.
Macquarie also noted that fewer people are dining out and spending less in China, and the Government's alcohol ban has significantly reduced business entertainment. From an analyst's perspective, this makes planning and forecasting especially difficult.
Following this development, Macquarie has retained its neutral rating and cut its price target by 20% to $6.40.
Justifying this price target, the broker said:
The outlook for the key Penfolds segment is becoming increasingly uncertain as volumes are re-allocated to other key markets with risks around pricing, volumes and parallel imports. In the absence of a strategy update from new management, it is challenging to be more positive.
However, given that shares are currently trading at $5.90, this suggests 14% upside from here over the next 12 months.
