What’s Behind The 20% Rally In Diageo Stock?

Ukraine, March 20, 2021: The Diageo logo may be seen on a smartphone and a computer screen in the backdrop of this picture illustration… [+]. (Image courtesy of Pavlo Gonchar/SOPA Images/LightRocket/Getty Images)
Getty Images/SOPA Images/LightRocket
The stock of Diageo (NYSE: DEO) has risen more than 21% in the previous six months and is now trading near $193 per share. The current rally was fueled by a number of factors, including a successful vaccine deployment, the removal of lockdowns, the reopening of eateries and pubs, and improved consumer morale. North America, the company’s largest market, has recently seen strong trends. In the first half of FY2021, sales in North America increased by 12.3%. Strong consumer demand, increased market share in the spirits category, a favorable category mix, and consistent stock replenishment by distributors and retailers have all contributed to the region’s growth. The upward trend is projected to continue in the months ahead. In recent months, the corporation has also put resources towards using its e-commerce skills. Diageo has announced intentions to increase its manufacturing capabilities at a new site in Plainfield, Illinois, by constructing two can lines. The $80 million plant will have the capacity to produce more than 25 million Ready-To-Drink cans per year and will be ready for commercial production by the summer of 2021. But, will Diageo’s stock continue to rise in the next weeks, or will a market correction be more likely? The Trefis Machine Learning Engine, which identifies trends in a company’s stock price data over the last ten years, predicts that DEO stock will climb by more than 6% in the next six months (126 trading days) after rising by 21% in the previous six months (126 trading days). The data also shows that patient investors would benefit from the company, as it gives strong double-digit returns to those who wait a year.
But how do these figures vary if you choose to hold DEO shares for a shorter or longer period of time? You can use Trefis Machine Learning to test the answer and many more combinations to see if DEO stock will rise following a dip or vice versa. You can evaluate the likelihood of recovery across time intervals of a quarter, month, or even a single day!
TRY THE MACHINE LEARNING ENGINE FOR YOURSELF:
IF DEO stock moves -5 percent over five trading days, THEN DEO stock moves an average of 3% over the next 21 trading days, with a 74% chance of a positive return over the next month.

Trefis Average Return
ADDITIONAL INFORMATION FOR YOU
Making Sense of DEO Stock Movements: Some Fun Scenarios, FAQs, and Making Sense of DEO Stock Movements:
Question 1: Does Diageo stock have a better average return following a drop?
Consider the following two scenarios.
Case 1: The stock of Diageo falls by 5% or more in a week.
Case 2: Diageo’s stock rises by at least 5% in a week.
Is the average return on Diageo stock after Case 1 or Case 2 higher in the following month?
After Case 1 (where the stock has just suffered a 5% loss over the previous week), DEO stock performs better, with an average return of 3.1 percent over the next month (21 trading days) versus an average return of 1.6 percent for Case 2 (where the stock has just suffered a 5% loss over the previous week).
In example, the S&P 500 has an average return of 3.1 percent in Case 1 and barely 0.5 percent in Case 2 over the next 21 trading days, according to our dashboard, which shows the average return for the S&P 500 after a decline or rise.
Use the Trefis machine learning engine to evaluate how Diageo stock will react following a given gain or loss over time.
Question 2: Does it pay to be patient?
Answer: If you buy and hold Diageo stock, you may anticipate near-term swings to fade away over time, and a long-term favorable trend to favor you – at least if the company is otherwise healthy.
Overall, facts and Trefis’ machine learning engine estimates show that patience pays off in most stocks!
The following table shows the returns for DEO stock over the next N days after a -5 percent change over the previous 5 trading days, as well as the returns for the S&P500:

Trefis Average Return
Question 3: If you wait a bit following a climb, what is the average return?
Answer: As mentioned in the preceding question, the average return after a rise is lower than after a decrease. Surprisingly, if a company has increased in the recent few days, you should avoid short-term bets for most stocks – although DEO stock looks to be an exception to this general rule.
The table below shows DEO’s returns over the next N days after a 5% shift over the previous 5 trading days, as well as the S&P500’s returns:

Trefis Average Return
By adjusting the variables in the charts above, you can test the trend for Diageo stock for yourself.
Retail revenues are being eroded by e-commerce, yet this could be an investment opportunity. A wide range of companies that stand to benefit from the huge change may be found in our E-commerce Stocks topic.
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