Diageo Shares Move Off Lows – Has Near Term Support Been Found?

Diageo's shares(LON: DGE) are showing signs of recovery today after a period of sustained bearish pressure. The share price has added 1.8% in trading today on the London Stock Exchange, in a small win for bulls after a 10% decline in the past month. This uptick prompts the question: has Diageo found a support level after recent challenges saw a new low of 1,908 hit?

From a technical perspective, the 1,900 psychological level could act as a near term floor, although the move close to the 30 RSI on the daily could also have caused some to step in near oversold conditions. Either way, it is very hard to look beyond the prevailing trend here, with DGE shares down 22.5% since the start of this year, and 50% over the past three years.

In recent weeks, the company announced plans to implement a $500 million cost-cutting program and consider substantial asset disposals by 2028. Chief Financial Officer Nik Jhangiani indicated that the portfolio overhaul would extend beyond typical brand sales, potentially involving significant assets. The company targets an increase in annual free cash flow to $3 billion by next year, up from $2.6 billion which would represent a significant improvement.

Analysts currently have a moderate buy rating on Diageo, with a consensus price target of 2,424, suggesting a potential upside of more than 20% from the current price. The wide range however highlights the difficulty in evaluating Diageo's future prospects, even amongst the professionals.

The current upward movement in Diageo's stock price, coupled with the company's strategic initiatives, suggests that it may indeed be finding a support level. However, the challenges facing the alcohol industry, including declining demand, the rise of weight-loss drugs, and potential industry shakeups, cannot be ignored. Whether Diageo can sustain this momentum remains to be seen, but the company's proactive measures, and view from the street offer a glimmer of hope to holders.