Diageo (LSE:DGE) shares have been on the rack for years. At £13.92, they’ve slumped a whopping 29% during the last 12 months. Over a five-year horizon they’ve more than halved in value (falling 56%).
There’s been little for investors in the FTSE 100 share to celebrate. Until now, at least, with sales stabilising and a new CEO in town hoping to turn things around.
Could Diageo’s share price be about to stage a stunning recovery? Each of the 21 analysts with ratings on the Guinness maker think it’s about to rise from current levels. The least optimistic forecaster thinks prices will reach £14.72 over the coming 12 months, up 6% from today. However, another reckons Diageo will rise a superb 76% in value by this time next year, to £24.50.
So who is right?
Gone flat
In reality, every one of these analysts expecting Diageo to rise could be proved wrong. Few had expected Diageo shares to experience the sustained underperformance of recent years. History could well repeat itself.
In fact, following the outbreak of war in the Middle East, the chances of this happening have increased. Sales have been under extreme pressure from weak consumer spending in recent years. Diageo’s decision to double-down on ‘premium’ drinks has left it especially vulnerable to the inflationary pressures that have seen drinkers drop down to cheaper labels.
An extended war in Iran could prolong its revenues problems, driving inflation and interest rates higher and cooling economic growth. The conflict also brings a range of cost problems, like raising energy-related expenses and the cost of making aluminium cans.
But it’s not just the war that threatens Diageo’s share price. The firm must also get to grips with lower alcohol consumption in its Western markets, a trend worsened by appetite-suppressing meds like Ozempic.
Why Diageo shares could rebound
Then again, the stock was moving sharply higher in 2026 before the war began, as hopes a turnaround under new CEO Dave Lewis gathered pace. If the conflict draws to a rapid close, and the company’s turnaround strategy yields more positives, investor appetite for the drinks giant could return.
Shareholders like me are hoping ‘Drastic Dave’ will wield the stick, selling underperforming labels, cutting costs and pivoting back towards mainstream drinks. And so far he’s living up to expectations, including axing layers of management, and in March he oversaw the $1.8bn sale of Indian cricket team Royal Challengers Bengaluru from its United Spirits subsidiary.
More recently, Diageo has been enjoying stronger sales in Europe, Asia, and Latin America and the Caribbean. The US and China may be tougher nuts to crack, but success in fast-growing areas like non-alcoholic beverages (think Guinness 0.0) and the ready-to-drink (RTD) market are an encouraging sign.
The final word
With the Iran War raging on, I can’t predict with any confidence where Diageo shares will go over the next year. But I do think the FTSE 100 stock will recover strongly over the long term. And with its shares trading on a rock-bottom price-to-earnings (P/E) ratio of 11.9, I feel it’s a top value stock to consider.
