Coca-Cola Just Got Sweeter. The Stock Looks Like a Buy.

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One analyst sees Coke’s earnings per share growing at a 12% annual clip through 2023, up from $2.71 that year.

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Coca-Cola stock has finally bounced back after reclaiming its COVID-era highs. Its shares should keep climbing.

The post-pandemic world hasn’t been easy for the beverage maker. While the S&P 500 reclaimed its pre-Covid high long ago, Coca-Cola (ticker: KO) ended 2021 up 8% at $59.21, still a touch from its all-time high of $60.13 on February 21, 2021 bottomed out (though above its dividend-adjusted high of $56.36). Adding to the disappointment, PepsiCo (PEP) shares climbed above their 2020 highs and ended 2021 up 17%.

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What difference does the new year make? Coca-Cola has started 2021 with a bang, closing the first week of January at $60.33 with a gain of 1.9%, finally reaching a new high. It has also outperformed Pepsi, which gained only 0.2% last week. Don’t be surprised if it continues to outperform.

Coca-Cola had a lot of adversities after the start of the pandemic. It relies on restaurants and other locations for a greater portion of its sales than Pepsi, and it was also Tab. like shutting down a small brand, Zico Coconut Water, and Odwalla, as well as some regional brands, during the year. Nor does the beverage titan have the huge snack business of Pepsi’s Frito-Lay.

All of this, however, should make 2022 a better year for Coca-Cola, writes Guggenheim analyst Laurent Grandet, who upgraded the stock from neutral to buy last Tuesday. He noted that the so-called on-premises business is improving at a faster rate than expected, while the company is focusing more on what it’s doing. Emerging markets are also improving. As a result, Grandet Coke’s earnings per share will continue to grow at a 12% annual clip through 2023, reaching $2.71 that year. This should help move the stock higher.

There is also room for an increase in the valuation of Coca-Cola. According to FactSet, it trades at 24.8 times 12-month forward earnings expectations, discounting Pepsi’s 25.8 times. ,[We] The stock seems to have grabbed the ground it lost in early ’22,’ writes Grandet, who raised his price target to $66.

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It’s not all clear sailing. Looming over the company is a tax dispute with the Internal Revenue Service that could result in losses of $12 billion, says CFRA analyst Garrett Nelson. While this is appalling, he argues that Coke should be able to offset this with better sales and better pricing.

Nelson writes, “In our view, the pending resolution of its IRS tax case … will lift a substantial overhang, allowing investors to focus on KO fundamentals and strong underlying on-premises sales and strong pricing environment.” Will allow the focus to be on speed.” Upgraded Coca-Cola’s stock last week. He sees the shares trading at $68, up 13% from Friday’s close.

To which we say, have a coke and a smile.

Write Ben Levishon at [email protected]

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