Diageo Share Price Forecast December 2021 – Time to Buy DGE?
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Shares of multinational beverage alcohol company Diageo (LSE: DGE) are in the red today, after closing on 4015p as of December 24th (17:56 GMT). Throughout the year, DGE shares have performed extremely well, reaching near its all-time high on several occasions.
Diageo – Technical Analysis
According to the financial statement released by Diageo, the market cap of the company is at £93.362 billion with total assets worth £31.953 billion. The revenue for the company in 2021 came in at £12.73 billion with a profit margin of 20.89% compared to £11.75 billion in 2020.
Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(77.2), Williams Percent Range (14)(−25.5), Bull Bear Power(97.0) and Ultimate Oscillator (7, 14, 28)(68.5) are neutral. Moving averages such as Exponential Moving Average (10)(3990.8), Simple Moving Average (10)(3982.2), Exponential Moving Average (20)(3949.3), Simple Moving Average (20)(3940.8) and Exponential Moving Average (30)(3910.1) are indicating a buy action.
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Recent Developments
Diageo operates in more than 180 nations around the world, producing its products in more than 140 sites around the world. It was known as the world’s largest distiller until being overtaken by China’s Kweichow Moutai and is still a major distributor of spirits and the world’s largest producer of Scotch whisky. The present company was born out of the merger of Guinness Brewery and Grand Metropolitan and debuted on the London Stock Exchange on 17 December 1997.
The company has been pretty busy during the last two years. The company increased its stake in Chinese baijiu company Sichuan Shuijingfang Company Limited (SJF) to almost 70% in February 2009. It also acquired a majority stake in Seedlip, a non-alcoholic spirits brand in August 2019. In January 2020, the US Securities and Exchange Commission alleged that Diageo had pressured distributors to buy products in excess of demand in order to hit performance goals. The company finally paid US$5 million to settle these charges.
Diageo released very positive trading updates recently including the Capital Markets Day update on 16 November. The report indicated that the company now expects organic net sales growth of at least 16% in the first half of fiscal 2022. The company has estimated that organic sales will grow between 5% and 7% for fiscal 2023-2025. The company has laid down clear plans for increasing its total beverage alcohol (TBA) market share value from 4% to 6% by 2030. If achieved, it would represent a 50% increase across spirits, wine and beer markets.
Should You Buy DGE Shares?
Diageo already owns a wide range of products such as premium products like Johnnie Walker Blue Label , everyday brands such as Guinness and non-alcoholic beverages such as Seedlip. All of these products can help mitigate the risk of loss of revenue from falling alcohol consumption among younger consumers. This also allows the company to appeal to a large customer base globally. due to its broad spread of products to meet different budgets and tastes.
Following the release of the trading update, many brokers increased their price targets for Diageo. For instance, Barclays raised its target price to 4,770p from 4,400p while Jefferies raised its target price to 4,800p from 4,200p. The shares aren’t without their own set of risks, however. If COVID-19 comes back and further lockdowns are announced, the shares will undoubtedly decline in value. All the signs point towards the market being concerned about this scenario today as we speak. This is reflected in its current share price which doesn’t leave a huge margin of safety. Existing DGE investors should hold on to their shares for the time being.
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