Diageo share price: what’s the outlook ahead of its half-year results?

Diageo will unveil its half-year results on Thursday 30 January, though analysts from Jefferies have opted to downgrade the stock ahead of its latest set of earnings.

The US-based investment bank opted to lower its rating from ‘buy’ to ‘hold’ last week after ‘three very strong years of change’ for the drinks maker.

‘[Diageo] remains a well-run, diversified company that operates in a favourable industry, however, we move to 'hold' given less conviction on the upside to street expectations with the shares now fairly valued,’ Jefferies said in a note.

Despite the downgrade, analysts at Jefferies remain optimistic about the stock’s price trajectory, issuing a target price of £36 a share, which implies a potential upside of 11% based on Diageo trading at £32.24 as of 16:20 (GMT) on Wednesday.

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Credit Suisse and Bernstein upbeat about Diageo

Analysts from Credit Suisse and Bernstein remain optimistic about Diageo, with the pair reiterating their respective ‘outperform’ and ‘market perform’ ratings for the stock.

Credit Suisse and Bernstein both upgraded their price targets for the stock to £36.30 and £34 a share respectively, implying a potential upside of 12.6% and 5.5%.

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Diageo acquires stake in non-alcoholic spirits maker

Earlier this month, Diageo acquired a minority stake in Ritual Zero Proof, a company which labels itself as the world’s first alcohol-free spirits brand.

‘Just like almond milk and veggie burgers, spirit alternatives are changing the landscape,’ Marcus Sakey, founding partner and chief brand officer of Ritual Zero Proof said.

‘In 18 months, we predict non-alcoholic options will be on every menu and the shelves of every grocery store.’

Diageo clearly sees significant growth potential in non-alcoholic alternatives, with the market expected to generate huge profits for investors over the next five years.

‘We are excited to support such an interesting new brand in the vibrant non-alcoholic space,” said Eugene Khabensky, ventures director at Diageo. ‘We put the consumer at the heart of our business, and Ritual Zero Proof is a fantastic offering that provides consumers with more choices of the highest quality.’