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Coca-Cola stock forecast: Will the fizz return?

By Rob Griffin

Edited by Jekaterina Drozdovica

20:28, 6 January 2022

Coca Cola bottle, read background
Coca-cola bottle – Photo: Shutterstock

The Coca-Cola company is the world’s largest non-alcoholic drinks business, selling its products in more than 200 countries and territories.

The 135-year-old firm, which was founded in Atlanta, Georgia in the United States, is best known for the carbonated soft drink that shares its name.

However, it’s also behind brand names such as Fanta, innocent smoothies, Schweppes, Costa Coffee, Dasani waters and Powerade sports drinks.

After a turbulent two years amid Covid-19, the company’s stock has finally returned to pre-pandemic levels. Yet what factors are shaping the Coca-Cola share price forecast going into 2022?

Coca-Cola stock price forecast – Credit: Capital.com

Coca-Cola stock analysis

Coca-Cola (KO) stock had its market debut back in September 1919. Now Coca-Cola is the 33rd most valuable company in the world.

The company has been a decent performer for investors over the past year, with the stock having risen 20% from $50.52 in early January 2021 to $60.68, as of 6 January 2022.

It’s now above the level it was back in January 2020, before the world started to realise that Covid-19 would have a significant effect on everyone’s lives.

Coca-Cola stock chart, 2017-2022 – Credit: Capital.com

KO stock fell 36% from 10 January 2020 to 16 March 2020, at which point the pandemic was in full swing and lockdowns were being announced around the world.

However, it has gradually recovered over the past two years, with the share price growth showing a broadly upward trend. The stock is also up 45% over the past five years from $41.74 in January 2017.

Coca-Cola stock chart, 2021-2022 – Credit: Capital.com

Latest results

The company revised up its full-year profit forecast after posting better than expected third-quarter results as the world started to reopen after a wave of Covid-19 lockdowns.

In a statement, it announced net operating revenues of $10bn for the three months to 1 October 2021, which was 16% higher than the $8.65bn achieved in the corresponding period in 2020.

Its consolidated net income for the third quarter was $2.47bn – 42% up on the $1,740 generated over the same time frame in 2020.

The company said earnings per share (EPS) grew 41% to $0.57, while comparable EPS was up 18% to $0.65. The latter included the impact of a three-point currency tailwind.

“Year-to-date cash flow from operations was $9.2bn, up $3.0bn versus the prior year, driven by strong business performance, five additional days in the first quarter and working capital initiatives,” it stated.

Strategic transformation

Coca-Cola now expects to deliver organic revenue growth of 13% to 14% for the full-year 2021, along with comparable EPS growth of 15% to 17%.

James Quincey, chairman and chief executive, said the company was updating its full-year guidance to “reflect another quarter of momentum” in the business.

“Our strategic transformation is enabling us to effectively navigate a dynamic environment and emerge stronger from the pandemic,” he said.

He pointed out that while the recovery “continues to be asynchronous around the world”, the company was investing for growth to drive long-term value for the system.

“Our strong system alignment and networked organisation are helping us unlock enormous potential in our brands and across our markets,” he added.

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Coca-Cola stock: buy, sell or hold?

The consensus 12-month KO stock price target for the next 12 month currently sits at $61.82, suggesting a moderate upside. This is based on 15 analysts’ views compiled by MarketBeat, ranging from the high of $66 and the low of $55. KO stock is rated as a buy, with 11 buy recommendations,  three hold, and one sell.

Coca-Cola price targets and recommendations – Credit: MarketBeat

The stock has been rated by eight analysts in the last 90 days, including JP Morgan’s Teixeira Andrea who upgraded the stock from neutral to overweight. On the bearish side, however, UBS Group has recently downgraded  the stock from buy to sell. 

Coca-Cola stock analyst price targets and ratings, October 2021 - January 2022 – Credit: MarketBeat

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

Coca-Cola stock forecast long-term

According to the algorithm-based forecasting service Wallet Investor that uses past performance to predict future price action, Coca-Cola is “an acceptable long-term (one year) investment”. The service gave a positive KO stock forecast, seeing the stock rising 5.4% to $64.10 over the 12 months to January 2023. The site estimated that the price could reach $70.17 by January 2024 and up to $75.55 a year later in early 2025.

Over the longer term, Coca-Cola shares could then hit $80.91 in January 2026, according to WalletInvestor,  while the five-year Coca-Cola stock prediction has it as high as $85.79 by January 2027. This would represent a 41% premium over the current level.

If this trend continues, then the stock could be even higher by early 2030. However, it’s important to remember that eight years is an extremely long time for equity markets.

Note that algorithm-based price predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

What do analysts say about Coca-Cola stock?

JP Morgan has an overweight rating on the stock, according to a broker note that it issued on 13 December 2021. Its Coca-Cola projected stock price for December 2022 has increased to $63 from $59. This would represent a 3.6% premium over the current $60.79 level, as of 5 January 2022.

According to Andrea Teixeira, an analyst at JP Morgan, Coca-Cola has been upgraded to overweight from neutral for three main reasons.

The first is the belief that “top-line momentum will build into 2022”, fuelled by a combination of reopening and pricing.

“Profitability is relatively less impacted by cost pressures (asset light model) as strong brand equity allows for low price elasticity and valuation is compelling vs. historical and peers, even considering the risk of a negative outcome from the tax dispute with the IRS,” she said.

Teixeira noted how Coca-Cola had undergone a “deep positive transformation” over the past few years by improving its sales portfolio and “refranchising and consolidating” bottling assets globally.

It has also set up new systems and procurement in the US, shifted focus from volume to value growth, and been transitioning senior management.

“We think Coca-Cola will benefit from economies re-opening and is well positioned to reaccelerate organic growth toward the top-end of its long-term 4-6% range. While the multi-billion dollar dispute with the IRS is an overhang, we think it is already reflected in the share price,” the analyst said.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, believes the “fizz has returned to Coca-Cola sales” since restaurants have resumed service across most of the world.

“Operating profits were up 11% to $2.9bn, for the third quarter despite a significant increase in marketing spend compared to last year with guidance for revenue growth upped for the full year,” she told Capital.com.

However, that’s not to say it’s immune from wider issues such as cost inflation, she pointed out. It’s also facing “renewed concerns about fresh restrictions” being imposed due to Omicron.

“However, the group still has some headroom and flexibility built into the business to overcome fresh threats. Rather than investing in big manufacturing plants, Coca-Cola partners with, and holds stakes in, local bottling companies,” she said. 

Streeter explained that this reduces the amount of capital tied up in the business and gives the group more room for manoeuvre.

“Instead, Coke concentrates its efforts on selling the syrups themselves and marketing its brands directly to consumers,” she added. “Strong brands mean price rises are less likely to lose customers, helping offset downturns that would otherwise affect demand.’’

FAQs

Is Coca-Cola a good long-term investment?

This all depends on your own investment objectives and your opinion of the stock. Coca-Cola is a long-established company that has performed well for investors over the past year – but past performance isn’t a reliable guide to future returns.

Will Coca-Cola stock go up or down?

Many factors dictate whether a company’s stock price rises or falls. Some of these are dependent on the company’s performance, while others are affected by wider macro-economic factors. The consensus 12-month KO stock price target for the next 12 month currently sits at $61.82, suggesting a moderate upside. This is based on 15 analysts’ views compiled by MarketBeat, ranging from the high of $66 and the low of $55. Yet you need to remember that there are no guarantees, and analyst predictions can be wrong.

Is Coca-Cola a good stock to buy in 2022?

KO stock is rated as a buy, with 11 buy recommendations,  three hold, and one sell, according to the 15 analyst views compiled by MarketBeat.  Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

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Coca-Cola Co (Extended Hours)
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-0.56 -0.890%

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