While many brands that operate in the States took advantage of the decade-long period of strong growth, this is likely to change, the analysts commented. A slowdown in alcohol consumption is now projected as many millennials are becoming more health conscious and the Generation Z demographic group, which enters the legal drinking age is "less prone" to alcoholic consumption.
Given this less than favorable outlook, the analysts downgrade Diageo plc (ADR) DEO's stock rating from Buy to Hold with a price target on the U.K.-listed stock of GBP25.50.
The primary reason for the downgrade is straightforward: Diageo has the highest sales exposure of 16 percent to "tail brands" in the U.S., the analysts highlighted. The American market accounts for 29 percent of total net sales but nearly 50 percent of operating profit.
Finally, among the few strong alcoholic categories, Diageo's outlook is also poor. For example, 24 percent of the company's U.S. net sales are in the growing vodka category but 11 percentage points of this stock is held by the Smirnoff brand, which "struggles" to maintain its market share.
Related Link:For Guinness Beer Owner Diageo, March Is The Money Month
Even Beer Companies Use AI And Machine Learning Technologies
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Image Credit: By Christopher F. Orr - Photo taken by Christopher F. Orr, Public Domain, via Wikimedia Commons
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