Investing 25-11-2022 15:07 20 Views

Diageo share price forms a wide symmetrical triangle

Diageo (LON: DGE) share price has risen in the past six straight days as demand for the stock rose. It was trading at 3,800p on Friday, which was the highest level since October 6 of this year. It has rebounded by over 15% from its lowest level this year. 

Diageo is a good defensive company

Diageo is a leading company in the alcoholic industry. It owns some of the most beloved brands in the world like Smirnoff, Captain Morgan, Johnie Walker, Ciroc, and Guinness among others It has over 200 brands. The firm operates in all geographies, with North America and Europe being its top-performing regions.

In 2022, Diageo made 6 billion in North America followed by £3.2 billion in Europe and £2.8 billion in Asia Pacific. Sales in most of its geographies rebounded as countries continued to reopen.

Its total revenue in FY’22 jumped to £15.4 billion, which was higher than the previous £12.7 billion. Despite soaring inflation, the company’s total operating profit rose by 18.2% to £4.4 billion. This growth was helped by the company’s super-premium brands whose revenue rose by 31%.

Diageo is a good investment for several reasons. First, the company generates most of its income in the US. As such, a weaker pound will likely be positive in reportable terms. In a report on Friday, Rokos, a hedge fund, said that the British pound will likely continue falling further due to Brexit, deglobalization, and the pandemic.

Second, Diageo has a good track record of delivering returns to shareholders. It has a healthy forward dividend yield of 2.29%. It recently increased its payout by 5% to 46.82p and is continuing to buy back its shares.

Finally, while the Diageo share price is not cheap, it is supported by ongoing growth. Analysts expect that its growth will likely accelerate in 2023 as inflation cools and China reopens.

Diageo share price forecast

Diageo stock chart by TradingView

So, is it safe to buy Diageo stock? The daily chart shows that the DGE stock price has risen in the past six straight days. As it rose, the shares moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the neutral point of 50.

Diageo has also formed a broad symmetrical triangle pattern that is shown in green. It is a few points below the upper side of this triangle pattern. Therefore, the stock will likely continue rising in the near term as buyers target the upper side of the triangle at 3,895p.

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