Investors should buy this growth-oriented wine maker with minimal exposure to inflation, according to RBC Capital Markets. RBC upgraded the Duckhorn Portfolio to outperform from sector perform. The firm has a price target of $23 on the stock, implying 32% upside from Friday's close. "We see solid topline growth trends both in off-premise with distribution and share gains, and on-premise with the channel recovery and share gains," RBC's Nik Modi said in a note Monday. Nearly half of Duckhorn's customers have an income higher than $125,000. Duckhorn's base of higher-income customers should be less impacted by rising prices, RBC said. "This positions NAPA well to capitalize on our expected beverage alcohol industry trends, which we expect will be a tale of two cities, with higher-income consumers less impacted by inflation, while lower-income consumers feel more the pressure with potential trade-down," Modi said. Given the wine aging process, cost inflation would be delayed for Duckhorn, RBC also pointed out. Duckhorn shares are underperforming the market this year, down 25.6% in 2022. RBC said the pullback offers "a compelling entry point." —CNBC's Michael Bloom contributed reporting.
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Investors should buy this growth-oriented wine maker with minimal exposure to inflation, according to RBC Capital Markets.