Up 16% In A Month, Will Diageo Stock See Higher Levels?

DEO: Diageo logo

Diageo’s stock (NYSE: DEO) has seen a rise of 16% in a month, while it’s down 14% this year. This compares with 8% and -16% returns for the broader S&P500 index over the same periods, respectively. This outperformance can partly be attributed to strong consumer demand and premiumization, which has aided its sales growth in the recent past. The company has seen its operating margins expand in 2022, led by pricing actions, premiumization, and improved fixed cost absorption from volume growth. These trends are expected to continue in 2023, as well. Furthermore, the company should benefit from the strengthening dollar. It reports its numbers in GBP while it generates a third of its sales from the North American region.

But now that DEO stock has seen a 16% rise in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of an increase in DEO stock over the next month. DEO stock has seen a move of 16% or more only 18 times in the last ten years. Of those, 12 resulted in DEO stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 12 out of 18, or a 67% chance of a rise in DEO stock over the coming month. See our analysis on Diageo Stock Chance of Rise for more details.

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Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data

  • After moving 3.1% or more over five days, the stock rose on 52% of the occasions in the next five days.
  • After moving 6.1% or more over ten days, the stock rose in the next ten days on 50% of the occasions.
  • After moving 15.6% or more over a twenty-one-day period, the stock rose on 67% of the occasions in the next twenty-one days.

This pattern suggests a higher chance of a rise in DEO stock over the next five and twenty-one days.

Diageo (DEO) Stock Return (Recent) Comparison With Peers And S&P500

  • Five-Day Return: DEO highest at 3.1%; STZ lowest at -1.0%
  • Ten-Day Return: BUD highest at 7.1%; SAM lowest at 0.8%
  • Twenty-One Days Return: BUD highest at 20.9%; SAM lowest at 2.2%

The Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Starbucks vs. Commercial Metals.

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Returns Dec 2022
MTD [1]
YTD [1]
Total [2]
 DEO Return 1% -14% 81%
 S&P 500 Return -2% -16% 79%
 Trefis Multi-Strategy Portfolio -2% -19% 220%

[1] Month-to-date and year-to-date as of 12/6/2022
[2] Cumulative total returns since the end of 2016

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