The US broker also raised its target price for the FTSE 100-listed drinks giant to 3,300p from 2,200p with the stock changing hands currently at 2,709.50p, up 1.1%.
In the sector review, the Jefferies analysts said: “While the crisis is not over given the risk of second waves/further restrictions, we see the world as nearer to the end of the pandemic than the beginning.”
They added: “The pandemic has turned bevs from defensive/growth stocks to pseudo-cyclicals. When a health solution eventually comes, the headwinds that the sector faces will be fairly temporary, in our view, and bevs should benefit from increased visibility on pre-pandemic earnings.
“The lower for longer rate environment will likely offer re-rating opportunities as recovery comes through.”
They added that the note looks “through the noise as to which stocks to own on the other side of the pandemic, namely companies with strong brand franchises, LT structural growth, where the good news is not yet priced in.”
Aside from Diageo, Jefferies also upgraded global brewers AB-InBev, and Heineken and French spirits group Pernod Ricard, but downgraded Denmark’s Carlsberg and Royal Unibrew.
Published at Wed, 07 Oct 2020 09:58:00 +0000-Diageo double-upgraded to ‘buy’ by Jefferies in an upbeat review of European drinks sector after coronavirus pandemic