I’m struggling to get my head across the Diageo (LSE: DGE) share price. I can scarcely imagine it’s fallen 45% during the last two years, and 30% within the final 12 months.

Isn’t this imagined to be one of the vital strong UK blue chips? A defensive inventory that holds agency in robust occasions and thrives within the good? Don’t individuals like a drink anymore?

Nicely, to a level, they don’t. Or a minimum of, they will’t afford the premium manufacturers that Diageo sells. Many customers have traded down to the tough stuff because the cost-of-living disaster bites. Gross sales have taken a success in Latin American and the Chinese language financial slowdown hasn’t helped. The US has been a drag for comparable causes. Gen Z are a sober bunch, it appears.

Can this FTSE 100 star shine once more?

Now Diageo faces a recent problem within the form of US commerce tariffs. It faces uncertainty over the price of exporting premium spirits like tequila from Mexico and whisky from Canada.

The board just lately declined to offer ahead steering, citing “macroeconomic and geopolitical uncertainty”. That spooked buyers additional. If the board can’t say what’s going to occur subsequent, how are buyers imagined to get a deal with on the inventory?

As a contrarian investor myself, this could really feel like a main shopping for alternative. A battered former inventory market darling, now buying and selling at a extra engaging valuation amid wider disarray. Diageo’s price-to-earnings ratio sits simply above 15, consistent with the FTSE 100 common. Traditionally, it has commanded a premium valuation. The dividend yield has additionally nudged up to 4%, a uncommon sight for this inventory. So, may this be the underside of the glass?

There are causes for hope. Overstocking points in Latin America, a key drive behind final 12 months’s revenue warning, seem to have been resolved. And Guinness stays the drink of our occasions, with the board swiftly sinking rumours of an £8bn sale.

Might it’s a superb restoration inventory?

CEO Debra Crew has a problem on her arms. Within the second half of 2024 working income fell 5% to $3.16bn, regardless of a small 1% rise in gross sales.

She’s outlined plans to enhance working capital effectivity, which may ease stability sheet issues. Nonetheless, the share price stays on a relentless downward spiral. I purchased after the preliminary drop, averaged down twice since, and I’m nonetheless sitting on a 30% loss.

So the place will the shares be this time subsequent 12 months? Now right here’s the constructive bit. The 21 brokers masking the inventory have produced a median one-year goal of two,541p. If right, that’s a 25% acquire from as we speak’s ranges. A tempting prospect, however forecasts are simply that – forecasts.

As one who’s taken a beating by the hands of Diageo, I can’t carry myself to imagine in such a quickfire restoration. A few of these price targets might have been set when Diageo was buying and selling at increased ranges and earlier than the tariff risk escalated.

I’m hunkering down and holding onto my shares, hoping the market turns in my favour. If I promote now, I’ve a nagging suspicion the Diageo restoration get together will begin with out me. In 12 months, the Diageo share price could possibly be wherever. Now, that’s one thing I can get my head spherical.