Diageo plc (DEO): A Bull Case Theory

We came across a bullish thesis on Diageo plc on Global Equity Briefing’s Substack by Ray Myers. In this article, we will summarize the bulls’ thesis on DEO. Diageo plc's share was trading at $95.01 as of September 29th. DEO’s trailing and forward P/E were 22.27 and 11.34 respectively according to Yahoo Finance.

Diageo, the London-based global beverage company behind brands like Johnnie Walker, Guinness, and Smirnoff, has faced a challenging year, with its stock down 26% YTD and 57% from its 2021 peak. The decline reflects slower growth, disappointing earnings, rising competition, tariffs, leadership changes, and investor concerns about execution. Despite these headwinds, Diageo is taking decisive steps to address them. The company is intensifying restructuring efforts, raising its cost-cutting target to approximately $625 million, and reallocating resources toward higher-growth segments such as premium spirits and no/low-alcohol beverages.

To respond to changing consumer preferences and moderation trends, Diageo is innovating with smaller pack sizes, canned and pre-mixed cocktails, and other alternative drink formats. Tariff and trade pressures are being mitigated through supply chain optimization, including relocating bottling operations, managing inventory strategically, and shifting investments, which is expected to offset roughly half of the tariff impact on operating profit.

Additionally, Diageo is actively managing its portfolio, divesting or exchanging underperforming brands such as Ciroc in North America for stronger growth opportunities in Tequila and Mezcal, while leadership transitions are designed to restore confidence in execution. These initiatives position Diageo to navigate near-term challenges while enhancing long-term growth potential. Even amid uncertainty, the company’s focus on restructuring, innovation, and portfolio optimization provides multiple levers to stabilize performance and unlock value, making the current environment a compelling entry point for investors willing to consider the strategic initiatives underway.

Previously we covered a bullish thesis on Diageo plc (DEO) by Jimmy Investor in March 2025, which highlighted its strong brand equity, premium pricing power, resilient margins, and global diversification. The company's stock price has depreciated approximately by 13% since our coverage due to near-term headwinds. The thesis still stands as Diageo’s defensive model and cash flow remain strong. Ray Myers shares a similar but emphasizes restructuring, portfolio optimization, and innovation to navigate current challenges.

Diageo plc is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held DEO at the end of the second quarter which was 39 in the previous quarter. While we acknowledge the potential of DEO as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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

Disclosure: None.