British booze maker Diageo PLC (LSE:DGE) has hardly been in high spirits this year, with the FTSE 100-listed multinational’s share price falling more than 10% in the first half.
But with destocking headwinds settling down and the prospect of positive earnings momentum in the upcoming financial year, Diageo shares may currently offer a cheap round for patient investors.
“Persistent EPS (earnings per share) downgrades and concerns that the business model is structurally broken has driven PE (price to earnings) relatives to long-run lows,” wrote analysts at the American bank Citi.
“However, with earnings/valuations metrics troughing in our view, and destocking headwinds likely to give way to positive earnings momentum in (financial year 2025), we think an inflection point has been reached,” they added.
It all comes down to Diageo’s preliminary full-year results scheduled for 30 July, which, according to Citi, “should act as the clearing event which allows investors to revisit what remains an attractive compounding growth story”.
Analysts noted that investor positioning is largely supportive of Diageo shares, which could encourage a 20% re-rating to the upside in the next 12 months.
As such, Citi has upgraded Diageo to a 'buy' with a 3,000p price target. The stock is currently priced at 2,520p.