Citi Maintains Bullish Stance on Diageo But Trims Target

Citi has reaffirmed its confidence in Diageo PLC (LON:DGE), maintaining a “Buy” rating on the global beverage giant's stock yet slightly reduced its price target from 3000p to 2900p. This adjustment comes in the wake of Diageo's fiscal year 2024 results, which the Citi carefully analysed before issuing its latest guidance.

Despite the price target reduction, the analyst sees promising growth prospects for Diageo, particularly as it pushes forward into the fiscal year 2025.

Observers are particularly enthusiastic about Diageo's potential for organic growth in the latter half of the fiscal year 2025. Citi analysts point to the easing of destocking pressures and a likely uptick in consumer spending as engines of this anticipated growth. This optimism comes despite the recent downgrading of Diageo stock by Goldman Sachs, which shifted its rating from “Neutral” to “Sell” on account of high earning risks and the potential for market underperformance.

The outlook on Diageo is not universally bullish across the financial analyst community. Other notable firms, including Deutsche Bank, UBS, and CFRA, have also recalibrated their price targets for Diageo shares. Their adjustments reflect the navigational challenges that Diageo, like many other companies, faces in a dynamic market environment.

Despite the mixed sentiment from analysts, Diageo's financial standing remains solid with a market capitalisation of £54.63 billion and a trailing Price-to-Earnings (P/E) ratio of 18.71, which could be attracting investors looking for relatively attractive valuations. The company has demonstrated revenue growth of 18.44% over the last twelve months as of Q4 2024 and continues to boast a robust gross profit margin of 60.18%.

While the market presents both opportunities and risks, Citi's maintained “Buy” rating signifies its belief in Diageo's enduring appeal to investors. As pressures related to destocking lessen and consumer habits potentially shift positively, there seems to be a favorable outlook for Diageo's performance in the near future. Investors will undoubtedly keep a close watch as the beverage leader navigates the evolving landscapes of both market demands and analyst expectations.