Here are the latest price targets for Diageo

The Diageo (LSE:DGE) The stock price is down about 17% over the past five years. And it has reached the point where I bought it for my wallet.

While the stock is at historically cheap levels, there’s nothing to indicate it can’t go further. So it’s worth watching what the analysts expect of Diageo shares over the next twelve months.

Price targets

Analysts believe a big move for Diageo’s share price is very possible over the next month. But they don’t agree on which way things are likely to go.

The highest price target I could find is 25% higher than the level the stock is currently trading at, which is quite optimistic. But on the other hand, interest rates are 21% lower, reflecting some significant risks.

I actually think this makes a lot of sense. Diageo’s business faces a number of actual and potential challenges that are beyond its immediate control.

If these decline or come to nothing, the company should do well and I expect the shares to rise. But if it doesn’t, it’s entirely possible the stock price will fall further.

US tariffs

The American elections are a major issue. In the polls, Donald Trump is leading and Diageo is on a list of 28 European stocks Barclays thinks he could be vulnerable if the Republicans win next week.

In May, the former president promised/threatened to impose 20% tariffs on all US imports. And while politicians don’t always do exactly what they say, I think this should be taken seriously.

However, there are a few things worth mentioning. The first – and most obvious – is that while Trump is ahead in the polls, the outcome is by no means a foregone conclusion.

Another is that some of Diageo’s best American products are produced in countries like Canada and Mexico, where the US has trade agreements. So the impact may not be as bad as it seems at first glance.

What should investors do?

In these types of situations, it can be difficult for investors to know what to do. And when there is uncertainty, it is often best to stay away.

However, with Diageo I have a different opinion. While there are some risks I can’t predict accurately, I think the stock is worth considering.

The reason is that I think a lot of the potential problems are reflected in the current share price. At one price-earnings ratio (P/E). at 18.5 it is as cheap as it has ever been in the last ten years.

Diageo price-earnings ratio 2014-24

Created at TradingView

Moreover, the company’s key advantages – the strength of its brand portfolio and the scale of its distribution – have remained firmly intact. And I think this will matter in the long run.

Can the stock continue to fall?

It makes sense that the Diageo share price will see a big move, both up and down, over the next twelve months. But I don’t want to try to predict what’s going to happen here.

I want to buy the shares at current prices. And if it drops further, I’ll probably try to take advantage of an even better opportunity in the future.