Goldman Sachs says gains in this alcohol giant will be muted going forward

The firm downgraded Diageo shares to neutral from buy, citing a prolonged normalization period in the U.S. spirits market.

Alcoholic beverage company Diageo will see limited upsides ahead, says Goldman Sachs. Analyst Oliver Nicolaï downgraded shares to neutral from buy. He also lowered his price target to $186.48 from $217.80, implying 7.9% upside from Wednesday's close.

The analyst noted that even without having factored in a recession into his forecasts for Diageo, he anticipates lackluster sales growth in 2023 and 2024. "With muted growth in the US, we see limited positive catalysts for Diageo and thus limited scope for earnings upgrades for the group," said Nicolaï. To be sure, he noted that if the company's U.S. market share gains accelerated, the company could strongly outperform the rest of the market.

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