Diageo share price: Shore Capital cautious about year ahead

Equities

Analysts nevertheless retain bullish stance on group

Shore Capital is still bullish on Diageo (LON:DGE) but is cautious on the year ahead for the drinks group. The comments came after the owner of Johnny Walker and Smirnoff posted a rise in sales for the six months ended December 31.

Diageo’s share price closed marginally lower in the previous session, shedding 0.22 percent to 2,537.00p, following an initial rally. The stock outperformed the broader London market, with the benchmark FTSE 100 index shedding 27.59 points to end the session 0.36 percent lower at 7,615.84, pressured by continued strength in the pound which weighs on blue-chips with international exposure.

ShoreCap weighs in on Diageo

Shore Capital reiterated its ‘buy’ rating on Diageo yesterday, following the FTSE 100 group’s results which showed a rise in sales and operating profit in the first half of the drink giant’s financial year. The analysts did not specify a price target on the shares.

“We are becoming a little more cautious on companies such as Diageo in the year ahead due to the expectation of a rising interest rate environment, which is likely to impact bond proxies such as Diageo,” the analyst explained, as quoted by Citywire. “However, the strong operational performance is likely to be taken well in the short-term so we retain our “buy” recommendation for the time being.”

Other analysts on drinks group

Beaufort Securities has been less upbeat on the shares, having downgraded Diageo to ‘hold’ in the wake of the results, trimming its price target from 2,600p to 2,500p. Sanford C. Bernstein meanwhile continues to see the Johnny Walker and Smirnoff owner as a ‘buy,’ setting a valuation of 2,900p on the shares yesterday. According to MarketBeat, Diageo currently has a consensus ‘hold’ rating and an average price target of 2,630.40p.

As of 08:03 GMT, Friday, 26 January, Diageo plc share price is 2,551.50p.