Another bad start to the day, and down 9% into the mid $9s. Ouch.
I was so close to buying in prior to the earnings, that I feel a vested interest in TWE despite not owning anything! But I am wondering whether this will be long term buying opportunity. It'd need to be long term to hold, as history shows trade tiffs can be a five year cycle. Last night did a bit more thinking and scenario planning, reckoning that TWE ex China is worth around $5 because of the margins and contribution to growth. Maybe you could push that to $6 if you were really bullish on the strategy to go high end in other markets, and based on the value of Penfolds including what's in the cellar? And then, assuming within 12 months there will be an 80% tarriff slapped on Aussie Wine (can you imagine Simon Birmingham talking his way out of this for Australia?) and that remains in place for 5 years - well that's a fair chunk of China market gone, except maybe some of the elites willing to pay x2 price for luxury Penfolds.
Seems a bit risky until there is a 7 in front of that price, and that's based on a willingness to hold for 5 years or until a regime change in Australia or China.
TWE Price at posting:
$9.69 Sentiment: Sell Disclosure: Not Held
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