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Treasury Wine share price edges lower on broker sell recommendation

James Mickleboro
glass of red wine spilling

The Treasury Wine Estates Ltd (ASX: TWE) share price is on course to end the week with a decline.

In afternoon trade the wine company’s shares are down 0.5% to $18.90.

Why is the Treasury Wine share price dropping lower?

Investors may have been selling the company’s shares today after the release of a reasonably bearish note out of Goldman Sachs.

According to the note, the broker has retained its sell rating but lifted its price target on Treasury Wine’s shares to $15.30.

This price target implies potential downside of around 19% for its shares over the next 12 months.

Why is Goldman Sachs bearish on Treasury Wine?

Goldman Sachs notes that softening data trends over the past couple of months have continued in a number of areas.

The note explains that Nielsen data demonstrates that its sales in the US wine market are softening. The data shows that Treasury Wine’s brands are exhibiting below market sales growth. This includes weakness in both volume and value terms on a year on year basis.

Goldman also notes that pricing in China and Australia was mixed across their respective e-commerce websites. The broker saw little movement beyond the already low relative pricing seen from recent months.

Another piece of data which it finds concerning is export data. Both Australian alcohol exports and Chinese wine import data continue to deteriorate. So much so, they are turning negative on a two-year CAGR basis.

Goldman concluded: “Overall, while the ecommerce pricing and sales indicators remain relatively positive or stable, the negative trend within the Nielsen US retail scan data and the broader macro data into China (Australian alcohol export and Chinese wine import) remain a concern, although the relatively stronger performance of premium wine sales suggests TWE’s portfolio should be outperforming in a declining market.”

Instead of Treasury Wine, the broker appears to believe investors should be buying Afterpay Touch Group Ltd (ASX: APT) and Telstra Corporation Ltd (ASX: TLS) shares.

This week Goldman Sachs reiterated its conviction buy ratings on both companies’ shares.

The post Treasury Wine share price edges lower on broker sell recommendation appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019