Treasury Wine Estates Ltd (ASX: TWE) and Temple & Webster Group Ltd (ASX: TPW) have both been sold down heavily over the past 12 months. One is down around 45%, while the other has fallen around 75%.
That sort of weakness can be a warning sign, and investors should always ask why the market has lost confidence.
But I also think both ASX 200 stocks now offer a more interesting risk/reward setup for patient investors.
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Treasury Wine Estates shares
Treasury Wine Estates has been a frustrating investment over the past year are down 45% over the period.
The wine giant owns some valuable brands, including Penfolds, but the market has become more cautious on its outlook. Weakness in parts of the US wine market, inventory issues, and questions around execution have all weighed on confidence.
However, I still think this is a business worth watching closely.
Penfolds remains a powerful luxury wine brand, and I think that is the centrepiece of the long-term investment case. Luxury wine is not immune from economic pressure, but great brands can be difficult to replicate. They are built over many years through reputation, quality, distribution, scarcity, and consumer trust.
China is also important. Treasury Wine's update last month pointed to strong Penfolds depletion growth in China over the Lunar New Year period, helped by demand for Bin 389 and Bin 407. That does not fix every issue overnight, but it suggests the China rebuild is still an important potential driver of future growth.
The company is also changing the way it operates, moving to a regional model designed to improve accountability and execution in each market. I do not think investors should give full credit for that until the benefits show up, but I like the intent. Treasury Wine needs sharper execution, more focused brand investment, and better consistency.
If management can stabilise the US, keep rebuilding China, and put more focus behind its best brands, I think Treasury Wine shares could recover strongly over the next few years.
Temple & Webster shares
Temple & Webster has had an even tougher time on the share market.
The online furniture and homewares retailer is down around 75% over the past 12 months. That is a brutal fall, and it shows how quickly investors can turn on a growth stock when consumer conditions deteriorate.
Furniture is a difficult category when households are under pressure. It is easy for shoppers to delay buying a new sofa, bed, or dining table when confidence is low.
But I think Temple & Webster still has a compelling long-term opportunity.
The company is trying to win share in a large furniture, homewares, and home improvement market. Its online model gives it a wide product range, while its drop-shipping approach can reduce the need to carry heavy inventory.
A recent trading update also showed management is willing to adjust quickly. The company has been rebalancing growth and profit, with changes to promotions, pricing, supplier support, marketing, and fixed cost growth. That is important because in a tough retail environment, flexibility can be valuable.
This is still a higher-risk stock. A weak consumer backdrop could last longer than expected as interest rates rise, competition is intense, and growth shares can remain out of favour when investors prefer safer earnings.
But a 75% fall changes the conversation. Temple & Webster does not need conditions to become perfect to deliver a better outcome from here. It needs to keep taking share, improve profitability, and show investors that the business can grow through a difficult cycle.
Foolish takeaway
Sharp share price falls usually come with a long list of concerns. That is why these opportunities are uncomfortable.
But investing is not only about buying businesses when everything looks clean. Sometimes the better setup appears when expectations have been cut, patience has disappeared, and the market is waiting for proof.
Treasury Wine and Temple & Webster still have work to do. I would not expect either recovery to move in a straight line. But with sentiment already so weak, I think both stocks are worth a closer look before the good news becomes more obvious.
