Diageo share price: Liberum remains bearish on group

on Sep 21, 2017
Updated: Mar 11, 2020

Liberum continues to see Diageo (LON:DGE) as a ‘sell,’ the analysts have said. The move comes after the maker of Johnnie Walker whiskey and Smirnoff warned yesterday that its first-half sales growth is likely to suffer from the timing of Chinese New Year and a ban on selling alcohol near Indian highways. 

Diageo’s share price, which fell deep into the red yesterday, has remained subdued today and as of 14:45 BST stood at 2,421.00p, 0.23 percent down intraday. The stock is slightly underperforming the broader London market, with the benchmark FTSE 100 index currently standing 0.02 percent lower at 7,270.15 points.

Liberum reaffirmed Diageo as a ‘sell,’ yesterday, with a price target of 2,200p on the shares, following the company’s presentation yesterday. The FTSE 100 drinks group announced that it expects its organic net sales growth rate in the first half of its financial year to be impacted by the later timing of Chinese New Year, as well as by the expected impact of the highway ban in India. 

“Diageo presented on the Europe, Russia, and Turkey region […] which has struggled to achieve growth. Price/mix has been rather anaemic over the past three years and management is cautiously guiding low single-digit top line growth in this context,” the broker’s analyst Nico von Stackelberg commented, as quoted by Citywire, adding that Liberum saw “no imminent signs of meaningful recovery in the region”.

Von Stackelberg further pointed out that the stock was trading on a 2017 price/earnings ratio of 21.7x ‘which is more expensive than its closest peers’.

Goldman Sachs, which has a ‘neutral’ rating on Diageo, meanwhile lowered its valuation on the shares from 2,400p to 2,385p. According to MarketBeat, the FTSE 100 group currently has a consensus ‘buy’ rating and an average price target of 2,545.14p. 

As of 14:55 BST, Thursday, 21 September, Diageo plc share price is 2,420.00p.