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KO Stock Reaches 52-Week High: Should You Buy, Hold, or Sell?
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Shares of The Coca-Cola Company (KO - Free Report) hit a new 52-week high of $71.81 on Aug 28, before dropping to close trading at $71.75. This was the second time Coca-Cola hit the 52-week high mark in less than two months. The KO stock reached a 52-week high of $65.81 on Jul 18.
Coca-Cola has seen its shares rise steadily in the past year, driven by resilient business trends on a strong brand portfolio, investments across the business and revenue growth across its operating segments. In the year-to-date period, KO shares have rallied as much as 21.7% compared with the broader industry’s 11.7% rise and the Zacks Consumer Staples sector’s 8.6% growth.
KO's performance is notably stronger than its close competitor, PepsiCo Inc. (PEP - Free Report) , which has recorded a year-to-date gain of 2.4%. KO surpassed other industry peers, including Monster Beverage’s (MNST - Free Report) 18.4% decline and Keurig Dr Pepper’s (KDP - Free Report) 8.7% growth.
Image Source: Zacks Investment Research
The Coca-Cola stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum and price stability. This technical strength indicates positive market sentiment and confidence in the leading beverage behemoth’s financial health and prospects.
Coca-Cola's Trades Above 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
Breaking Down KO’s Formula for Market Success
Coca-Cola’s strong brand equity, marketing, research and innovation have helped it garner a market share of more than 40% in the non-alcoholic beverage industry. KO has been putting its best foot forward to evolve its business model, transforming into a total beverage company with something for everyone to drink.
In its efforts to become a total beverage company, Coca-Cola is focused on high-growth brands across its beverage portfolio, including Fuze Tea and Powerade, and introducing products like Coke Lemon and Reformulated Sprite.
To drive value, Coca-Cola continues to invest in key activations like music festivals, the Euro 2024 Football Championship and the Paris Olympics. Partnerships with foodservice customers to promote combo meals are also in place to boost sales.
Additionally, leveraging its portfolio and unique system capabilities gives Coca-Cola a competitive edge. The company looks well-poised for long-term growth, backed by innovation and accelerated digital investments. It has refined its innovation process to focus on bigger opportunities and faster time to market. Recent successes include the reformulated Sprite, Fuze Tea in Europe, and Minute Maid Zero Sugar in North America.
Coca-Cola has seen a surge in e-commerce, with growth rates doubling in many countries. It has accelerated digital investments to strengthen consumer connections and pilot digital initiatives to meet online demand.
While meeting short-term goals, KO is building capabilities and innovating, starting with marketing. Last year, it launched Studio X, a digital ecosystem that integrates marketing capabilities with its global network. As a result, Coca-Cola is now producing content quickly and at scale, measuring impacts in real-time.
These efforts have enhanced KO's ability to create and deliver marketing content, integrate activations with timely innovations, and scale successes for maximum impact.
Are There Hiccups in KO’s Success Path?
Although Coca-Cola sees favorable trends across most markets, it could succumb to macroeconomic disruptions across some markets. These include low consumer confidence in China, geopolitical and economic issues in Eurasia and the Middle East, and high inflation in Argentina, all of which could negatively impact its revenues.
Management notes that inflation is starting to normalize in the developed markets. However, some developing and emerging markets continue to face intense inflation, resulting in higher prices. Also, currency headwinds could affect performances in certain geographies.
With current rates and hedged positions considered, the company expects currency headwinds to reduce 2024 comparable revenues by 5-6% and comparable EPS by 8-9%.
Is Coca-Cola’s Premium Valuation Justified?
Coca-Cola undoubtedly commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. However, we believe that its valuation is somewhat too stretched at this time.
KO trades at a significant premium to the industry peers on a forward 12-month price-to-earnings (P/E), as evidenced by a forward 12-month P/E multiple of 24.19X. The current valuation is above its five-year median of 23.79X and surpasses the broader industry’s multiple of 21.69X.
Image Source: Zacks Investment Research
The company’s ability to deliver on its promise of offering something for everyone to drink, with a focus on innovation and digital expansion, is crucial. While success in these areas could further strengthen its market leadership, failure could pose serious challenges for this soft drink giant. At this moment, its current valuation seems unwarranted. KO has a Value Score of D.
KO’s Estimates Suggest Growth Trajectory
The Zacks Consensus Estimate for Coca-Cola’s 2024 and 2025 EPS rose by a penny each in the last 30 days. The upward revision in earnings estimates indicates that analysts are gaining confidence in the stock.
For fiscal 2024, the Zacks Consensus Estimate for KO’s sales and EPS implies year-over-year growth of 0.6% and 6%, respectively. The consensus mark for 2025 sales and EPS indicates 4.6% and 6.3% year-over-year growth, respectively.
Image Source: Zacks Investment Research
What Should be Your Approach?
Investors face a pivotal question regarding Coca-Cola’s investment decision. Despite the company’s dominant market position, diverse product portfolio, and strategic focus on innovation and digital expansion, the stock remains in a tough spot. The company is navigating a challenging landscape, marked by rising inflationary pressures, macroeconomic disruptions across some markets and adverse currency rates.
With a cautiously optimistic outlook for the upcoming quarters, KO remains an attractive investment for long-term investors due to its robust profitability and expanding global presence. However, its premium valuation might cause some investors to be cautious, suggesting higher risks at current price levels. For existing shareholders, retaining the stock could be a prudent decision, given its strong long-term growth prospects.
Image: Bigstock
KO Stock Reaches 52-Week High: Should You Buy, Hold, or Sell?
Shares of The Coca-Cola Company (KO - Free Report) hit a new 52-week high of $71.81 on Aug 28, before dropping to close trading at $71.75. This was the second time Coca-Cola hit the 52-week high mark in less than two months. The KO stock reached a 52-week high of $65.81 on Jul 18.
Coca-Cola has seen its shares rise steadily in the past year, driven by resilient business trends on a strong brand portfolio, investments across the business and revenue growth across its operating segments. In the year-to-date period, KO shares have rallied as much as 21.7% compared with the broader industry’s 11.7% rise and the Zacks Consumer Staples sector’s 8.6% growth.
KO's performance is notably stronger than its close competitor, PepsiCo Inc. (PEP - Free Report) , which has recorded a year-to-date gain of 2.4%. KO surpassed other industry peers, including Monster Beverage’s (MNST - Free Report) 18.4% decline and Keurig Dr Pepper’s (KDP - Free Report) 8.7% growth.
Image Source: Zacks Investment Research
The Coca-Cola stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum and price stability. This technical strength indicates positive market sentiment and confidence in the leading beverage behemoth’s financial health and prospects.
Coca-Cola's Trades Above 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
Breaking Down KO’s Formula for Market Success
Coca-Cola’s strong brand equity, marketing, research and innovation have helped it garner a market share of more than 40% in the non-alcoholic beverage industry. KO has been putting its best foot forward to evolve its business model, transforming into a total beverage company with something for everyone to drink.
In its efforts to become a total beverage company, Coca-Cola is focused on high-growth brands across its beverage portfolio, including Fuze Tea and Powerade, and introducing products like Coke Lemon and Reformulated Sprite.
To drive value, Coca-Cola continues to invest in key activations like music festivals, the Euro 2024 Football Championship and the Paris Olympics. Partnerships with foodservice customers to promote combo meals are also in place to boost sales.
Additionally, leveraging its portfolio and unique system capabilities gives Coca-Cola a competitive edge. The company looks well-poised for long-term growth, backed by innovation and accelerated digital investments. It has refined its innovation process to focus on bigger opportunities and faster time to market. Recent successes include the reformulated Sprite, Fuze Tea in Europe, and Minute Maid Zero Sugar in North America.
Coca-Cola has seen a surge in e-commerce, with growth rates doubling in many countries. It has accelerated digital investments to strengthen consumer connections and pilot digital initiatives to meet online demand.
While meeting short-term goals, KO is building capabilities and innovating, starting with marketing. Last year, it launched Studio X, a digital ecosystem that integrates marketing capabilities with its global network. As a result, Coca-Cola is now producing content quickly and at scale, measuring impacts in real-time.
These efforts have enhanced KO's ability to create and deliver marketing content, integrate activations with timely innovations, and scale successes for maximum impact.
Are There Hiccups in KO’s Success Path?
Although Coca-Cola sees favorable trends across most markets, it could succumb to macroeconomic disruptions across some markets. These include low consumer confidence in China, geopolitical and economic issues in Eurasia and the Middle East, and high inflation in Argentina, all of which could negatively impact its revenues.
Management notes that inflation is starting to normalize in the developed markets. However, some developing and emerging markets continue to face intense inflation, resulting in higher prices. Also, currency headwinds could affect performances in certain geographies.
With current rates and hedged positions considered, the company expects currency headwinds to reduce 2024 comparable revenues by 5-6% and comparable EPS by 8-9%.
Is Coca-Cola’s Premium Valuation Justified?
Coca-Cola undoubtedly commands a high valuation, reflecting its strong market positioning, brand power and long-term growth potential compared with other non-alcoholic beverage companies. However, we believe that its valuation is somewhat too stretched at this time.
KO trades at a significant premium to the industry peers on a forward 12-month price-to-earnings (P/E), as evidenced by a forward 12-month P/E multiple of 24.19X. The current valuation is above its five-year median of 23.79X and surpasses the broader industry’s multiple of 21.69X.
Image Source: Zacks Investment Research
The company’s ability to deliver on its promise of offering something for everyone to drink, with a focus on innovation and digital expansion, is crucial. While success in these areas could further strengthen its market leadership, failure could pose serious challenges for this soft drink giant. At this moment, its current valuation seems unwarranted. KO has a Value Score of D.
KO’s Estimates Suggest Growth Trajectory
The Zacks Consensus Estimate for Coca-Cola’s 2024 and 2025 EPS rose by a penny each in the last 30 days. The upward revision in earnings estimates indicates that analysts are gaining confidence in the stock.
For fiscal 2024, the Zacks Consensus Estimate for KO’s sales and EPS implies year-over-year growth of 0.6% and 6%, respectively. The consensus mark for 2025 sales and EPS indicates 4.6% and 6.3% year-over-year growth, respectively.
Image Source: Zacks Investment Research
What Should be Your Approach?
Investors face a pivotal question regarding Coca-Cola’s investment decision. Despite the company’s dominant market position, diverse product portfolio, and strategic focus on innovation and digital expansion, the stock remains in a tough spot. The company is navigating a challenging landscape, marked by rising inflationary pressures, macroeconomic disruptions across some markets and adverse currency rates.
With a cautiously optimistic outlook for the upcoming quarters, KO remains an attractive investment for long-term investors due to its robust profitability and expanding global presence. However, its premium valuation might cause some investors to be cautious, suggesting higher risks at current price levels. For existing shareholders, retaining the stock could be a prudent decision, given its strong long-term growth prospects.
Coca-Cola currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.