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Treasury Wine Estates share price: December wine export data in focus

Treasury's share price continues to slide, after the company guided for lower FY20 earnings last month.

Treasury Wine Estates share price: a bumpy road

It’s been a rough couple of weeks for Treasury Wine Estates (ASX: TWE).

All up, Treasury has now lost ~35% of its market value in less than a month.

Given the company’s exposure to the Chinese market (counting itself as the largest Australian wine exporter to China) – and the ongoing concerns around the Novel coronavirus – this steep and sustained share price sell-off should come as little surprise.

Indeed, investors have continued to abandon the stock: It fell as much as 3.57% today, to an intraday low of $11.35 per share a little after noon.

Treasury last traded around these price levels in early-2017.

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Wine data can’t revive confidence

The release of Q4 wine export data today – which highlighted a 13% increase in the value of Chinese exports and a 17% increase in the volume of exports during the quarter – wasn’t effective at reviving investor faith in TWE.

The picture for US wine exports was also weak: with the value of US wine exports declining 1% and export volume dropping an even more significant 14%, during Q4. This was attributable to an increase in competition.

All up, Australian wine exports increased 3% in CY19, hitting $2.91 billion, on a value basis.

Looking at premium wine exports, though Morgan Stanley noted that 'growth was strong in high end wine [...] where TWE is more prominent,’ such growth, remains offset against two key risks, including: the potential for further guidance downgrades off the back of the coronavirus threat and ‘management turnover’ risk.

Though aware of such risks, Morgan Stanley’s price target of $15.00 per share does imply some upside potential for Treasury investors at current price levels.

Macquarie, more bearish than Morgan Stanley, said, 'we note that the impact of coronavirus on tourism and consumption was not factored into TWE's recent downgrade and potentially has a further negative impact on volumes if it persists.'

Macquarie currently has a price target of $13.3 on TWE.

Speaking to the broad impact on Australia’s wine industry, Wine Australia today noted:

‘Looking ahead into 2020, we anticipate that coronavirus will have an impact on sales, particularly to China, but at this stage it is difficult to predict the degree of that impact.

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