Diageo upgraded to 'neutral' by JPMorgan Cazenove

JPMorgan Cazenove upgraded Diageo to ‘neutral’ from ‘underweight’ and raised the target price to 1,900p from 1,700p, noting that the stock is down 4% year-to-date versus the European beverages sector up 10%.

The upgrade coincides with press reports over the weekend suggesting that 3G Capital is mulling a bid for the company.

Commenting on the reports, JPM said: “Details are scarce but we believe Diageo’s beer assets, which would give AB InBev a foothold in Africa, could be the main appeal.”

Brazilian billionaire Jorge Paulo Lemann owns private equity firm 3G Capital and has a controlling stake in AB InBev.

“While we still see operational headwinds, we believe a piecemeal value of Diageo could be attractive,” said JPM.

At 10:27 BST, Diageo shares were up 6.6% at 1,876.50p.