Diageo: RBC upgrades stock

(CercleFinance.com) - On Monday, RBC upgraded Diageo shares from 'underperform' to 'sector perform', raising its target price from 2,100 pence to 2,400 pence.


In a research note, the broker explains that the 'affordable luxury' strategy hitherto favoured by the British spirits group seems to have run into trouble.

RBC believes that Diageo's problem is not one of sales volumes, but rather prices, following a 30% jump in prices since 2020, a figure well above the rate of inflation.

However, with the arrival of a new CFO and a new head of investor relations, the broker believes that the company has the capacity to reinvent itself as a traditional FMCG group.

While acknowledging that such a turnaround would imply a sharp reduction in earnings estimates, the professional stresses that it would also help restore market confidence, provided that it is accompanied by a reduction in the company's costs.


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