The Treasury Wine Estates Ltd (ASX: TWE) share price is trading lower on Monday.
At the time of writing, the wine giant's shares are down 0.5% to $12.06.
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Is this a buying opportunity?
One leading broker that appears to see this weakness in the Treasury Wine share price as a buying opportunity is Citi.
According to a note out of the investment bank this morning, the broker has retained its buy rating and $13.80 price target on the company's shares.
Based on the current Treasury Wine share price, this implies potential upside of 14.5% over the next 12 months.
Citi also expects a fully franked 2.4% dividend yield in FY 2022 at current levels. If we add this into the equation, the total return on offer stretches to almost 17%.
Why is Citi bullish on the Treasury Wine share price?
Citi came away from a key industry event in the United States feeling very positive.
The broker notes that the event pointed to a recovery in high-margin on-premise and cellar-door wine sales in the United States. This is consistent with recent feedback from rival Duckhorn and bodes well for its Treasury Americas business, which it expects to deliver strong earnings growth during the first half.
Citi commented: "We attended the GFA 4Q21 update early today, which revealed on-premise and cellar door wine channels in the US are recovering, consistent with recent feedback from Duckhorn. This is a tailwind for Treasury Americas noting on-premise and cellar door are high margin channels contributing 19% of its NSR. We forecast Treasury Americas 1H22 EBITS to increase by +19% relative to pcp, despite the divestment of commercial wine brands in March 2021, driven by the recovery in on-premise and cellar door channels and margin expansion. However, an increase in restaurant costs as highlighted by GFA, which may result in consumers considering to eat out less, could be a concern in 2H22e."
