The Endeavour Group Ltd (ASX: EDV) share price has taken a tumble this week.
Since this time last week, the drinks company's shares have lost 10% of their value.
Investors have been selling down the Endeavour share price after the company's full year results disappointed.
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Is the weakness in the Endeavour share price a buying opportunity?
According to a note out of Goldman Sachs, its analysts believe investors should take advantage of this weakness to pick up shares.
In response to its results, the broker has reiterated its buy rating with a trimmed price target of $8.10. This implies potential upside of 9% for investors over the next 12 months.
And with Goldman forecasting a 21 cents per share dividend in FY 2023, which equates to a 2.8% yield, the total potential return on offer stretches to approximately 12%.
What did the broker say?
Goldman acknowledges that Endeavour's result was a bit of a mixed bag. It said:
EDV reported 2H22/FY22 results largely in-line with market expectations at the group level, but missed Retail EBIT margin (2H22 4.6%, in line with GSe, -1pt vs Factset Consensus) and FY23 first 7 weeks comp sales trend was weaker than expected (Retail: -6.7% YoY vs GSe -0.6%). On the other hand, Hotels was above expectations with EBIT margin (2H22 23.3% vs GSe 18.5%) and first 7 weeks comp trend was strong at +75% YoY.
This has led to the broker downgrading its earnings estimates slightly for the coming years.
'Value entry point'
Nevertheless, it remains positive on the long term and sees the Endeavour share price pullback as a "value entry point."
Despite the stock sell down on the back of results, our longer-term investment thesis for EDV does not change. We continue to see that EDV has one of the most loyal consumer bases in Retail (unique annual active users +15% YoY to 4.5mn in FY22) and improving VOC NPS. As the company continues to invest in consumer loyalty and digitalization, we expect that this will continue to drive mid-single digit sales growth in mix improvement together with cost efficiencies for margin expansion. We hence view the pull back in share price as a value entry point into a high quality and defensive player in AU Consumer.
