All the doom and gloom seemed to be getting a bit much for Diageo (LSE: DGE) shares. Seemingly out of nowhere, the share price slid 65% in only a few years. The outlook of the entire industry was rocked by a sudden shift in consumer habits. Even the company’s super-popular (and hyper-profitable!) drink of Guinness was not able to stem the tide. You would have to forgive any would-be investor from taking one look and running a country mile!
But in May of 2026, some interesting things started happening. It all began with a very interesting Q3 update from the company. The share price has now risen 13% on the back of some welcome good news. The reversal of fortunes has got many an investor (including myself) wondering whether we have just seen the turning point for Diageo.
Important context
Important context for the trading update: expectations were pessimistic. The consensus going into it was that Gen Z drinking less and weight-loss drugs like Ozempic would have a negative effect on sales volumes. Analysts were predicting a 2.3% overall decline…
What happened? Sales went up! Organic net sales rose 0.3% overall thanks to strong growth in Europe, Africa, and Latin America. Although, it must be said that the problem area of North America was still something of a sore spot.
As a sign of where things might be going, this is a welcome bit of news. The impact of changing consumer habits hasn’t really hit the income statement as of yet. And this could be a bellwether telling us that the impact won’t be as severe as previously feared. It might even turn out to be, as the Americans like to say, a ‘nothing burger’.
A buy?
And if demand for the spirits and drinks Diageo sells picks up then it’s hard to not look at this as a potential bargain opportunity. Despite the dividend slash earlier in the year, the forward dividend yield is a touch over 4% – above the FTSE 100 average.
The price-to-earnings ratio of 13 looks reasonable too. That figure is looking like it will come down further in the next two financial years if the current analyst consensus for earnings growth is on the mark.
And with worries of overinflated valuations and a possible AI bubble elsewhere, the sturdy nature of the business could prove resilient. Alcohol has long been known for its defensive qualities – albeit some may be put off by investing in a company that sells products that can be harmful to health.
Only time will tell for sure whether the recent upswing is a long-awaited turning point or simply white noise in the grand scheme of things. Personally, I thing there’s plenty to like here and that the stock is worth considering.
