Coca Cola (KO) has been going through a bit of a rough time in the last few weeks after being downgraded by analysts 4 days in row. The stock has basically been dropping, some days slowly some days by a couple percent, since January 4th when the first downgrade happened. Coke was trading at around $53 per share at the time and has seemed to bottom out around the $48 mark. I have been watching Coke for a while and this definitely is looking like it could be a good buy opportunity to get into Coke relatively cheap. They haven’t quite reached my target price yet (fingers crossed) but seeing as how they are the leading beverage company in every market in the world except for 2, which are led by Pepsi surprise surprise, and this isn’t likely to change anytime soon I don’t see the stock hurting for long even with the headwinds they currently have to deal with.
One of the major headwinds that Coke currently has to deal with is the multi billion dollar tax case they are currently fighting that could see them owe the IRS upwards of 3.4 Billion dollars. This case is also the main reason for the 4 downgrades that they received as they could potentially (but probably not) owe as much as 10.5 Billion to the IRS if they lose. The other issue that Coke, and everybody else, has to deal with is the shutdown and/or limiting of movie theatres and restaurants as a decent portion of their revenue comes from these sources. While these are pretty solid headwinds they are both short to medium term headwinds depending on how long Corona lasts and what happens with the tax case. Even with all of that when I go into the store I’m still going to buy my Barq’s Root Beer, Vanilla Coke or Coke Slurpee and so is everyone else who drinks coke products, so they aren’t exactly going to lose a big customer base long term. Even if you are buying healthier drinks or don’t think you are buying a coke product, they own so many different drink brands you probably still are buying a coke product. Pepsi is their only real competition with Keurig Dr.Pepper brands being a distant third. There are other competitors and they are getting bigger especially with energy drinks being so popular and the push for healthier choices, but it is largely a three horse race.
Cokes current lower stock price and their nearly 3.5% dividend definitely has me Keeping a close eye on them and would definitely be a good stock to watch at the moment. They are still a few dollars above where I would like to se them be for me to buy and still a good $10 above March prices (I felt there were other discounts that were a better buy for me in March though, like certain Canadian banks down 30% from their current prices and paying 5-6% plus dividends which was way too good to pass up), but they are getting closer to my buy point and likely will not be under the $50 dollar mark for very long. They are also in their 59th straight year of increasing their dividend and have paid a dividend every year since 1920 so that isn’t likely to go anywhere anytime soon.
Coca-Cola (KO) Current Price $49.29/ Market Cap $211.82 Billion/ P/E 25.56/ EPS $1.928/ Dividend $1.64/ Dividend Yield 3.33%
Coca-Cola is an American Multinational beverage corporation headquartered in Atlanta, Georgia. They manufacture, retail, and market non-alcoholic beverage concentrates and syrups. Coca Cola was invented in 1886 and was sold in 1889 for $2,300 and was than incorporated in Atlanta in 1892. Coke owns a lot and I mean a lot of stuff. They own: Indian Cola brand Thumbs Up, Barq’s, 50% of Inca Cola, Fuzz Beverage, Honest Tea, ZICO, 19.36% of Monster Beverage with an option to increase this to 25%, 68.3% of Coca-Cola Bottlers Africa, Chi Ltd., Topo Chico, Costa Coffee, Moxie, Organic & Raw Trading Ltd, 22.5% of MADE Group, 30.8% of Coca-Cola Amatil Ltd. which also owns 6.93% of MADE Group increasing Cokes stake in that company to over 25%. Coke leaves a lot of the bottling to third parties but will often own it’s own bottler outright or own a portion of the bottling company.
Coke will also occasionally step out of the beverage game into other ventures, though this doesn’t happen very often. The best example of this is Columbia Pictures, which Coke bought in 1982 for $692 million and sold it to Sony for $3 Billion in 1989. Films such as Ghostbusters, Stripes and The Karate Kid came out while Coke owned the company. Coke also famously threatened to leave Atlanta when business leaders in Atlanta refused to honour Martin Luther King Junior after his Nobel Peace prize win. [J. Paul Austin, the chairman and CEO of Coca-Cola, and Mayor Ivan Allen summoned key Atlanta business leaders to the Commerce Club’s eighteenth-floor dining room, where Austin told them flatly, ‘It is embarrassing for Coca-Cola to be located in a city that refuses to honor its Nobel Prize winner. We are an international business. The Coca-Cola Company does not need Atlanta. You all need to decide whether Atlanta needs the Coca-Cola Company.’ Within two hours of the end of that meeting, every ticket to the dinner was sold.— Andrew Young (Sourced from Wikipedia)].
In less impressive news Coke has been the world’s leading producer of plastic waste for the past 2 years and has actively fought against reducing their use of plastic saying that customers like it because it is re sealable and light. They aren’t wrong in saying this and there probably aren’t any great/ cheap alternatives right now, this will likely become more and more of an issue for the company in the future with all of the push for companies to be greener. That’s about all I’ve got to say about Coke at the moment. I’ll be watching them closely for the next little while hoping they drop a bit more and likely buying some if they do. Just one more company you may want to look into and do some research on if you have some investment money burning a hole in your pocket.
Disclaimer: Coke stock price is as of January 26, 2021. Coke is also on my watchlist though I do not have any immediate plans to open a position.