The Diageo (LSE:DGE) share price was once a world record. The FTSE100 the alcohol giant was one of Britain’s most admired blue chips. But the last few years have been brutal.

The troubles began with a profit warning in November 2023 amid falling sales in Latin America. From that point on, problems began to pile up quickly. Supply issues, rising costs, lower costs of living and younger consumers drinking less have all taken their toll.

Weight-loss drugs such as Ozempic and Wegovy may also have dampened alcohol cravings, while U.S. tariffs on key brands including Mexican tequila and Canadian whiskey added additional pressure. Losing inspiring CEO Ivan Menezes in 2023 didn’t facilitate. It was a perfect storm.

The fight for blue chips

Diageo’s latest full-year results, published on August 5, underscore the challenge. Organic net sales increased 1.7%, driven by balanced volume and pricing, but operating profits fell 27.8% to $4.33 billion

Cash generation remained robust, with free cash flow increasing from $2.33 billion to $2.74 billion. Brands like Don Julio, Guinness and Crown Royal Blackberry are in demand. Even in tough times, people still drink. But the overall reaction was grim. Diageo still has a long way to go.

FTSE 100 Cyclical Shares

History shows that investing and markets are cyclical. Diageo has made up for losses before, but today it faces recent challenges.

Alcohol has traditionally been viewed as a defensive sector, but cost of living pressures and health trends mean investors cannot take it for granted. Over the last year, the share price has fallen by 30% and in three years by as much as 50%.

Incredibly, the company’s stock is currently trading near 10-year lows. Ten years ago the share price was 1,831p. Today is 1816. However, I found one sign of hope…

A controversial opportunity

Analyst consensus forecasts put the one-year share price target at 2,302p. If true, this would represent a significant raise of 26.5% from today’s level.

Combined with a rate of return of 4.3%, if forecasts are correct, the total rate of return could exceed 30%. For contrarian investors, these stocks may be worth considering. But only with a long-term perspective.

They are certainly inexpensive, with a price-to-earnings ratio of 14.9. Success is not guaranteed, but if Diageo rebounds, the rewards could be significant for those who buy at today’s beaten levels.

I still see potential for recovery and I stand by this decision in the long term. The company’s diversified portfolio and the cash it generates suggest it may be able to weather this storm and restore shareholder value. However, these things are never guaranteed.

After such a hit, I feel like the sell-off has gone a little too far. These confident broker forecasts confirm my suspicions that the stock could fall and enjoy some nice momentum.

But this begs the question – what is the trigger? We need a healthier global economy, better jobs to give teenage drinkers something to celebrate, and solid sales growth. We’re not there yet.

So I see more exhilarating recovery stocks in the FTSE 100 to consider today.