Whether after a 35% decline this year or Diageo (LSE:DGE) share price rebound in 2026? Analysts are bullish, but investors need to think carefully.

The FTSE100 Spirits has a fresh CEO who sees clear potential for the business. However, the company still faces some major challenges in the coming year.

Analyst forecasts

Overall, analyst price targets for Diageo over the next 12 months are quite positive. From what I can see the average is £20.93 or 25% above the current share price.

This would be a good return in 2026, but is it feasible? Realistically, for shares to rise 25%, the company will need to return to sales and earnings growth.

It is worth noting that analysts’ forecasts in this regard are quite modest. While 2025 is expected to be the lowest year, things are not expected to return to 2023 levels anytime soon.

Analysts expect revenues to grow by 0.5% and earnings per share by 1% in 2026. And I’m not convinced that’s enough to push the share value to almost £21.

Development challenges

One of Diageo’s biggest problems recently has been frail demand in key markets such as the US. There is reason to believe this situation could continue into 2026. In the US, alcohol producers sell to wholesalers, not directly to retailers. As a result, a wholesaler’s inventory level can be a useful data point for investors.

Source: Federal Reserve Bank of St. Louis

In this respect, the picture is not particularly positive for Diageo. High inventories (in relation to sales) will probably mean frail demand, which is currently close to a record.

I think this may be a substantial challenge for a company from the FTSE 100 index. Therefore, I am cautious about the company’s ability to achieve such growth that may affect its share price in 2026.

Beyond 2026

I’m not convinced that Diageo shares will recover in 2026, but it may not matter to long-term investors. In fact, it’s worth looking at this as a buying opportunity.

The company’s recent problems have all been about demand, and there’s little it can do about it. However, its competitive advantage remains largely intact.

Moreover, the fresh CEO has an impressive track record of reviving failing businesses. That’s another reason why investors may want to be patient with the stock.

Diageo may not return to 2023 profits any time soon, but that may not be necessary for it to be a good investment. At today’s prices, steady growth may be enough.

Long-term investing

I don’t think Diageo will be a stock worth considering for investors looking for action in 2026. However, for those taking a long-term view, the story may be different.

Good investing is buying stocks when they are inexpensive. And that inevitably means that other people think there is something wrong with the core business.

The same may be the case with Diageo. High inventory levels will continue to be a challenge next year, but the company’s unique assets mean the long-term equation may be different.