The Coca-Cola Rally has just started
Coca-Cola's stock rally is just getting started, according to a closely watched Wall Street beverage analyst.
"We see the company emerging from the FY21 transition year stronger for four reasons: 1) strength in emerging markets, although vaccination rates remain low, 2) quick underlying recovery than originally expected, 3) portfolio restructuring and rationalization resulting in a lean and agile organization, and 4) the overall marginal benefit of the promotion model. Compound annual growth rate of 12% in FY23, reaching $2.71 that year, excluding potential liquidation of bottled assets.
Grandet raised its buy rating on Coca-Cola to neutral, with a revised price target of $66. It also raised its forecast for Coca-Cola's earnings over the next three fiscal years.
Shares of The Coca-Cola Company rose 1% to $59.86 in premarket trading Tuesday.
The analyst comments come at a surprising time, as Coca-Cola has been one of the best-performing stocks over the past three months.
We say it's surprising that the company, along with its competitors in the packaged food business, is still struggling with high inflation that affects potential margins. And in Coca-Cola's particular case, 40% of U.S. sales are made domestically and 30% overseas (or related to meals, sporting events, etc.). In the midst of this unpredictable pandemic.
According to Yahoo Finance Plus data, Coca-Cola shares are up 12% over the past three months. The S&P 500 is up 9.4% year-over-year.
But Grandet believes it's time to play Coca-Cola stock, citing better cost management under CEO James Quincey, and a gradual return to normalcy as the transition brings people to places and, more recently, athlete acquisition. BodyArmor branded beverage.
Grandet adds, "We believe the company is becoming increasingly nimble, with a portfolio focused on larger, more profitable brands that will lead to greater efficiencies. The savings are expected to help support marketing investment at 2022-2019 levels, which will benefit" In addition, that said, the BodyArmor acquisition, now included in our model, could add 300 basis points to the North America segment and 100 basis points to the consolidated company in FY22."
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