Introduction
Diageo, the world’s largest spirits maker, has ruled out the sale of its iconic Guinness brand and its stake in Moet Hennessy, dispelling recent speculation. Analysts at Jefferies responded positively, reaffirming their confidence in the company’s future, which is poised for growth under new leadership.
Diageo Shuts Down Guinness Sale Rumors
Last week, reports emerged suggesting Diageo might explore selling Guinness, valued at approximately £8 billion, alongside its investment in Moet Hennessy, part of the LVMH empire. Over the weekend, Diageo firmly dismissed these rumors, stating, “We have no intention to sell either.”
This statement reassures investors about the company’s commitment to its key brands. Diageo’s shares, which had seen a minor boost following the speculation, dipped slightly by 0.3%, closing at 124.71p.
Analysts Back Diageo’s Strategy
In their report titled Guinness Is Still Good For You, Jefferies analysts Edward Mundy and Andrei Andon-Ionita maintained a “buy” rating for Diageo, setting a target price of 2800p. They emphasized that the decision to retain Guinness and the Moet Hennessy stake reflects the company’s confidence in its portfolio’s future potential.
The analysts also highlighted the expected impact of Nik Jhangiani, Diageo’s new finance chief, whose leadership is anticipated to focus on accelerating growth, increasing profits, and improving cash flow.
Market Movements and Sector Trends
While Diageo solidified its stance, the broader FTSE market experienced mixed results amid global economic factors:
- FTSE 100: Rose slightly by 0.02% (1.36 points) to 8503.71.
- FTSE 250: Fell 0.7% (148.55 points) to 20369.5.
Global technology stocks tumbled following the rise of China’s AI firm DeepSeek, which has raised concerns over the valuations of major U.S. tech giants. Investment trusts exposed to tech suffered significant losses:
- Allianz Technology Trust fell 5.2% to 422p.
- Polar Capital Technology Trust dropped 6.8% to 356.5p.
- Scottish Mortgage Investment Trust declined 5.2% to 1004.5p.
Mining and Commodity Sector Declines
The mining sector faced pressure due to falling copper prices, with key players witnessing losses:
- Anglo American: Dropped 6.2% to 2378p.
- Antofagasta: Fell 3.3% to 1696.5p.
- Glencore: Declined 3.7% to 361.5p.
- Rio Tinto: Lost 1.8% to 4899.5p.
Reports also indicated that rival BHP, down 0.5% to 1992.5p, would not make another bid for Anglo American after last year’s failed £39 billion offer.
Positive Momentum for Burberry and British American Tobacco
Luxury fashion brand Burberry saw its price target raised by JP Morgan, UBS, and Stifel following its strong trading update last week. Despite this, shares dipped 3.7% to 1133p after a sharp 10% surge on Friday. Burberry shares remain up 15% for the year, doubling since their September low.
Conversely, British American Tobacco experienced a notable rise after UBS upgraded its rating to “buy” from “neutral” and increased its price target to 3900p. Shares surged 4.7% to 3150p, driven by optimism in its long-term growth prospects.
Conclusion
Diageo’s decision to retain Guinness and Moet Hennessy reflects a confident long-term strategy, earning praise from analysts and investors alike. While market volatility persists across sectors, Diageo’s commitment to its iconic brands reinforces its position as a leader in the spirits industry.
