Diageo plc (DEO): A Bull Case Theory 

We came across a bullish thesis on Diageo plc on Value investing subreddit by Weldobud. In this article, we will summarize the bulls’ thesis on DEO. Diageo plc’s share was trading at $89.93 as of January 13th. DEO’s trailing and forward P/E were 21.27 and 10.57 respectively according to Yahoo Finance.

Diageo plc, together with its subsidiaries, engages in the production, marketing, and distribution of alcoholic beverages in North America, Europe, the Asia Pacific, Latin America and Caribbean, and Africa. Dave Lewis takes over as CEO of Diageo on January 1st, bringing 27 years of experience at Unilever and a seven-year tenure as CEO of Tesco, where he successfully turned around the business and positioned it for stock price appreciation.

Known for aggressive cost-cutting and focusing on core growth areas, Lewis faces the challenge of reinvigorating Diageo, a company with over 200 globally recognized brands, including Johnnie Walker, Smirnoff, Cîroc, Ketel One, Guinness, Captain Morgan, Baileys, Don Julio, Casamigos, and Tanqueray. Revenue has grown from $15.2 billion in 2017 to $20.5 billion in 2022 but has stagnated since, reaching $20.24 billion in 2025. Despite solid credit ratings—Moody’s A3/Stable, S&P A-/Stable, Fitch A-/Negative—and plans to reduce debt, the stock has declined roughly 37% this year and is 60% below its 2022 peak.

The core issue is not mismanagement but declining alcohol consumption per capita, particularly in spirits, as consumers drink less rather than abstaining entirely. Diageo acknowledges these trends and is implementing cost-saving measures and strategic allocation of capital, including asset sales such as its 65% stake in East African Breweries Limited to Asahi for approximately $3 billion, which will reduce net debt-to-earnings by 0.25 times.

Analysts expect Lewis to continue rationalizing the brand portfolio, cutting costs, using free cash flow to reduce debt, and divesting non-core assets, while leveraging high-profile events like the upcoming World Cup to boost sales. Given its diversified global portfolio, strong cash flow, nearly 5% dividend, and potential for strategic transformation under Lewis, some analysts consider Diageo an attractive entry point around $85, presenting a compelling risk/reward scenario amid a broader challenging environment for alcohol stocks.

Previously, we covered a bullish thesis on Diageo plc (DEO) by Jimmy Investor in March 2025, which highlighted the company’s strong brand portfolio, pricing power, resilient margins, and global diversification. DEO’s stock price has depreciated by approximately 17.71% since our coverage.  The thesis remains valid despite slowing alcohol consumption as fundamentals and attractive valuation make a compelling a low low-growth but stable and cheap stock. Weldobud shares a similar perspective but emphasizes CEO Dave Lewis’s strategic initiatives, including cost-cutting and asset rationalization.

READ NEXT: 30 Stocks That Should Double in 3 Years and 11 Hidden AI Stocks to Buy NOW 

Disclosure: None.