TD Securities has raised its view on Diageo plc, moving the stock to a buy rating from hold and lifting its price objectives to 1,750 pence on the London listing and to $93 on the U.S. ADR. The broker framed the change as driven by a perceived mismatch between the company s valuation and its recovery potential under new leadership.
Valuation and target methodology
In setting its new target, TD Securities applied a 14 times multiple to Diageo s forward 12-month earnings per share estimate. The broker characterized that multiple as a discount of 5.1 turns relative to Diageo s five-year average forward price-to-earnings multiple of 19.1 times. TD Securities said this valuation gap creates an attractive entry point, particularly given expectations for CEO-led cost reductions and selective reinvestment to restore growth and sharpen commercial execution.
Trading context and U.S. weakness
The broker noted that Diageo is trading near levels described as multi-decade lows, a situation the firm attributes in part to soft performance in the U.S. spirits market. TD Securities highlighted the company s own acknowledgement of competitive challenges stateside, citing persistent share losses.
Specifically, Diageo s NABCA market share slipped from a peak of 18.8% to 17.7% over the trailing six months through April 2026, and the company has recorded 10 consecutive months of year-over-year share declines. Those trends are central to the report s debate over U.S. competitiveness and underpin the broker s focus on remedial commercial measures.
Leadership and strategic moves
Dave Lewis, who commenced his role as chief executive on January 1, is expected to apply a playbook shaped by prior turnaround experience that emphasises cost discipline, SKU rationalisation, and competitiveness restoration. TD Securities pointed to an internal review under John O Keeffe, the newly appointed head of North America and a 30-plus-year company veteran, encompassing a price architecture overhaul for Diageo s key tequila brands Casamigos, Don Julio, and Astral, alongside a broader portfolio and route-to-market assessment.
Financial assumptions and forecasts
The broker left its fiscal 2026 organic sales growth forecast unchanged at negative 2.0%, which it noted is in line with consensus and sits at the high end of Diageo s guided range of negative 2% to negative 3%. TD Securities maintained its fiscal 2026 EPS estimate of $1.62, versus consensus of $1.61. The firm also kept its fiscal 2027 organic sales growth estimate at positive 1.7%, compared with consensus of positive 1.5%.
Diageo reported fiscal 2025 net sales of $20.25 billion. The company s forecasts cited by the broker envisage revenue falling to $19.74 billion in fiscal 2026 and to $19.53 billion in fiscal 2027.
Catalyst and longer-term aims
A key upcoming event identified by TD Securities is a strategy update scheduled for August 6, which will coincide with the release of fiscal 2026 results. The broker described that date as the first opportunity for Lewis to set out his strategic vision for the company.
Looking beyond the immediate horizon, TD Securities said it expects Diageo to articulate a long-term growth algorithm that targets low-single-digit organic sales growth and mid-to-high-single-digit organic operating profit growth.
Summary
TD Securities upgraded Diageo to buy and raised price targets, citing a valuation gap, planned cost cuts and reinvestment under new CEO Dave Lewis, and an upcoming strategy update on August 6 as key drivers. The broker left near-term organic sales and EPS estimates broadly unchanged and flagged continued U.S. market weakness as a central issue to be addressed.