12:10 PM EDT, 05/29/2024 (MT Newswires) -- Duckhorn Portfolio's ( NAPA ) recent acquisition of Sonoma-Cutrer should help the winery company build top-line growth over time although the company and its stock may continue to be knocked around for a while before recovering, RBC Capital Markets said in a research note on Wednesday.

The RBC analysts cut their price target for Duckhorn shares to $11 from $14 previously, citing the company's fiscal Q3 sales forecast, adding to a string of moves in recent quarters by the company to temper growth expectations. Duckworth blamed ongoing "softness" in consumer demand for the likely shortfall and RBC said while it does not anticipate another downward revision when the company reports its Q3 results next week, the consumer slowdown could extend into the current quarter and the disruptions resulting from changes to Duckworth's wholesale network "could create further downward pressure" on sales.

RBC maintained its outperform rating for Duckworth, however, primarily based on valuation and believing its longer-term prospects should improve. Short interest on the stock has risen to a multi-year high as its share price was slid almost 50% over the past year, although the RBC analysts said that recent negativity may be overdone, noting its projected price-to-earnings multiples are well below most of its peers in the alcohol and beverage industry.

The RBC analysts also said Duckworth's April 30 acquisition of Sonoma-Cutrer from Brown-Forman (BR-A, BR-B) should start contributing to sales during the current quarter. Its customer base also skews toward higher-income consumers, which have shown more resistance to economic conditions, but the analysts cautioned that the company has struggled to attract younger buyers.

Price: 7.94, Change: -0.11, Percent Change: -1.31