Coca-Cola is the largest non-alcoholic beverage manufacturer and one of the most recognisable consumer brands in the world. The group's portfolio includes several products - with Coca-Cola, Fanta and Sprite being the most notable. In addition to soft drinks, it markets bottled water, fruit juice, sports drinks, as well as ready-to-drink teas and coffees.
Momentum has been positive over the past few months. The company recently posted 3Q23 results in which all key metrics were stronger than expectations, with resilient demand across the product portfolio supported by innovative and effective marketing strategies.
Technically, the stock is trading in the lower range of an inclining linear-regression channel pattern (refer to the first chart). This makes for an attractive entry point, as the stock price is expected to revert to its long-run mean.
Fading downside momentum according to the MACD indicator, as well as sidewards movement of the On-Balance Volume indicator, supports our bullish stance.
The price is below the 200-day simple moving average (SMA) of ~$59. We implement a counter-trend strategy in anticipation of a near-term correction.
The FNB ETNs, namely COETNQ (without currency exposure) and COETNC (with currency exposure), can be used to replicate exposure to KO. These are both listed on the JSE.
Share Information
| Share code | KO US |
|---|---|
| Industry | Food, Beverage & Tobacco |
| Market Capital (USD) | 241 billion |
| One year total return | -3.46% |
| Return year-to-date | -10.28% |
| Current price (USD) | 55.78 |
| 52 week high (USD) | 64.99 |
| 52 week low (USD) | 51.55 |
| Financial year end | December |
| Closing paragraph | Various technical indicators suggest that the stock price will make an imminent break to the upside. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 2.48 | 2.67 | 2.80 | 2.99 |
| Growth (%) | 7.70 | 4.75 | 6.79 | |
| Dividend Per Share (USD) | 1.76 | 1.82 | 1.92 | 2.02 |
| Growth (%) | 3.30 | 5.78 | 4.99 | |
| Forward PE (times) | 20.88 | 18.88 | 17.62 | |
| Forward Dividend Yield (%) | 3.41 | 3.59 | 3.62 | |
| Closing paragraph | Growth is expected to slow due to macroeconomic pressure next year before recovering in the following year. | |||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position |
COO - Stop Loss (Close the position) |
EZPW - Stop Loss (Close the position) |
MSFT - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 330.03 | 8.28 | 331.32 |
| Current | 307.86 | 7.70 | 327.89 |
| Movement | -6.7% | -7% | -1% |
| Summary text | The stock breached our stop-loss level, and we closed the position. | The stock breached our stop-loss level, and we closed the position. |
The development of a bullish flag pattern remains of interest. The stock is trading above its 200-day simple moving average. Fading downside momentum provides further support.
Our profit target is $365 with a trailing stop-loss at $318. Exit the position around 12 January 2024. |
| Share Name and position |
GILD - Buy (Continue to hold) |
HST - Buy (Continue to hold) |
NKE - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 80.00 | 16.26 | 105.18 |
| Current | 78.15 | 15.77 | 100.02 |
| Movement | -2.3% | -3.0% | -4.9% |
| Summary text |
The development of a bullish flag pattern remains attractive. The stock is testing its 200-day SMA, with emerging upside momentum offering some support.
Our profit target is $97 with a trailing stop-loss of $73. Exit the position on 19 April 2024. |
Stability in the price with regular upswings, makes the stock attractive. The stock remains below the 200-day SMA but remains above the 200-week SMA. Downside momentum, however, is a concern.
Our profit target is $19 with a trailing stop-loss of $15.30. Exit the position around 20 December 2024. |
The stock remains above the major support level and is trading below the 200-day simple moving average. Emerging upside momentum supports the longer-term bullish trend.
Our profit target is $118 with a trailing stop-loss of $100. Exit the position around 7 February 2024. |
