Shares of the UK-based Diageo PLC (GB:DGE) surged today after a double upgrade from UBS analyst Sanjeet Aujla from Sell to Buy. Aujla also raised his price target on the stock from 2,300p to 2,920p, predicting a growth of 12% in DGE share price. Following the upgrade, DGE stock rose by more than 2%, ranking among the top gainers on the FTSE 100 Index at the time of writing.
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Diageo owns around 200 well-known brands, including Baileys, Smirnoff, Tanqueray, Guinness, and many others.
UBS Turns Bullish on Diageo
After issuing a Sell rating on DGE stock in December 2023, UBS has now turned bullish on the stock, highlighting its recovery and growth prospects in 2025. UBS is primarily optimistic about the company’s Don Julio Reposado tequila and the recently launched Crown Royal Blackberry-flavored whisky, which has driven the recent growth in the U.S.
As a result, UBS expects that Don Julio and Crown Royal will drive the U.S. sell-out growth to over 3.6% in the first half of 2025, significantly outperforming the industry, which is expected to experience a decline of 1%. Notably, a product is considered to have reached sell-out when all of its SKUs (stock-keeping units) are sold out.
UBS also assured investors that the company is nearing the end of its earnings decline period after a 31% reduction in earnings per share (EPS) over the last two years.
Furthermore, UBS acknowledged that the U.S. market remains challenging, and volumes are expected to decline in 2025. However, they believe the market cycle will eventually improve, with an expected growth of around 3% annually in the U.S. spirits sector over time.
Are Diageo Shares a Good Buy?
According to TipRanks’ consensus, DGE stock has received a Moderate Buy rating based on a total of 10 recommendations from analysts. This includes seven Buy, one Hold, and two Sell recommendations. Moving ahead, the Diageo share price target is 2,790.58p, which indicates a modest upside of 7% from the current trading levels.
