Diageo PLC (LSE:DGE) has been downgraded to 'sell' by Deutsche Bank as its premium drinks brands are seeing as being at risk as consumer spending comes under pressure.
The share price target was cut to 3230p from 4050p, implying 13% downside, and the recommendation moved from the previous 'hold'.
"We believe the valuation is stretched," the Deutsche analysts said, given the FTSE 100 group is the only European beverages company that doesn't trade at a discount to its three-year and five-year average P/E ratios.
The analysts also believe US Spirits growth has slowed and "fear inventory levels may overshoot," the bank said, which would require the FTSE 100 group's shipments to lag.
"We therefore believe Diageo needs upgrades to outperform and see that as increasingly unlikely as macro and category headwinds build."
The shares fell 3.6% to 3,547p on Wednesday morning.