Goldman Sachs has shifted Diageo PLC (LSE:DGE) from 'sell' to 'neutral', following a 20% drop in the drinks giant’s share price.
The bank cites a more attractive valuation and what it calls “strategic optionality” as the main reasons for the move.
After a difficult year in the US spirits market, Diageo now trades at about 15 times expected 2026 earnings, a discount to global consumer staples where it once commanded a premium.
“Its valuation is compelling in an historical context,” Goldman says.
Management has also ramped up cost savings, targeting $625mn over three years, with half of that expected to flow directly to profits.
The upgrade is more about limited downside than renewed optimism.
US sales are still expected to struggle, but with cash flow improving and further asset disposals possible, new management at least has a plan.
As Goldman puts it, cost savings should support margins in 2026, but top-line growth needs to return for further progress.
For now, investors can count on a higher dividend and a more defensive investment while they wait for US demand to recover.
In a separate note, Deutsche Bank reckons Diageo may be 'getting its mojo back'. That said, it rates the stock 'hold' with a 2,060p price target.
"We believe there has been a step change in the quality and clarity of the message from the company," it said.
In afternoon trading, the share were flat at 2,024p.