Diageo now a ‘buy’ for Deutsche Bank over strong European beverages sector backdrop

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Diageo PLC (LON:DGE) was upgraded to ‘buy’ from ‘hold’ by Deutsche Bank as part of a research on the wider European beverages sector. 

The target price of the owner of Guinness and Johnnie Walker was hiked to 3900p from 2850p. 

READ: Diageo upped to outperform as Credit Suisse predicts quick recovery 

Analysts said the sector “offers an attractive combination of long-term structural growth and semi-defensive/cyclical characteristics at an undemanding valuation relative to the market, European Staples and government bond yields”. 

Although the path to the new normal “may be uneven”, the long-term growth opportunity for European beverages is “attractive, material and in many cases undervalued”. 

FTSE 100-listed Diageo also benefits from the exposure on the US market, where growth jumped 11% in the third quarter. 

In its last update, released in September, the drinks producer said it expected sequential improvement in organic net sales and operating profit compared to the second half of fiscal 2020. 

Shares advanced 3% to 2,955.52p on Tuesday morning, having rallied 18% in the past month. 

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