Potential KO Entrance Point
As a 128-year-old multinational beverage giant, The Coca-Cola Company is a staple in any portfolio.
In the post-covid era of high growth tech stocks, boring bread and butter companies such as Coca Cola have been relatively underbought. It has severely underperformed the SPY, analysts estimate 2020 revenue to decline by 11%, and covid shutdowns have affected its operations globally. Why would anyone want to buy KO's underperforming stock when shares like TSLA have rocketed more than 1000% in the last year?
When thinking of value, it is important to keep the long term in mind. It may be tempting to dump your entire portfolio in companies like TSLA or NVDA - it is completely possible that one would make a lot of money by doing that. However, the difference between these companies and Coca Cola is that while it's possible that the next generations might be driving Teslas, they will definitely be consuming Coca-Cola products. Just look at Wikipedia's massive alphabetically organized list of Coca Cola brands (https://en.wikipedia.org/wiki/List_of_Coca-Cola_brands). They have proven to be flexible in changing markets, adapting to the decline in demand for sugary drinks by increasing the role of products such as Dasani, SmartWater, and Coke Zero. KO maintains a majority market control in every region except the Middle East, and its brand is recognizable across the globe. Coca Cola is a great long-term investment that is likely to produce returns for the foreseeable future.
KO is currently trading at a PE ratio of 25.67, well below the SPY's PE of 38.54. Earnings are expected to shrink this period, however, 2021 is expected to bring with it a revenue growth of 10.7%. Although KO is leveraging lots of debt ($51 billion with a debt to equity ratio of 2.84), it has approximately $11 billion of cash on hand and a 9-month positive operating cash flow of $6.2 billion (January 2020 - September 2020). This should be enough to allow KO to meet its current debt obligations. It is currently outperforming estimated earnings for the 2020 period. It has purchased $7 billion in long term investments, a bullish sign for shareholders. It has also increased its dividend (currently a 3.38% yield) for 58 years straight, making it a dividend king.
The $48.50 (1) range seems to be its current demand zone, providing recent support. I expect KO to rally into the $51.50 range (2) before either encountering resistance and reversing back to support at 1, or continuing higher towards resistance at its 6 month high (3). There is a possibility that it breaks through support at 1, however, I find that to be unlikely due to how many times it has been tested (but you should always set a stop loss!).
I also believe that it's worth mentioning that the 200 EMA on the 5-year window seems to be acting as additional support:
In the post-covid era of high growth tech stocks, boring bread and butter companies such as Coca Cola have been relatively underbought. It has severely underperformed the SPY, analysts estimate 2020 revenue to decline by 11%, and covid shutdowns have affected its operations globally. Why would anyone want to buy KO's underperforming stock when shares like TSLA have rocketed more than 1000% in the last year?
When thinking of value, it is important to keep the long term in mind. It may be tempting to dump your entire portfolio in companies like TSLA or NVDA - it is completely possible that one would make a lot of money by doing that. However, the difference between these companies and Coca Cola is that while it's possible that the next generations might be driving Teslas, they will definitely be consuming Coca-Cola products. Just look at Wikipedia's massive alphabetically organized list of Coca Cola brands (https://en.wikipedia.org/wiki/List_of_Coca-Cola_brands). They have proven to be flexible in changing markets, adapting to the decline in demand for sugary drinks by increasing the role of products such as Dasani, SmartWater, and Coke Zero. KO maintains a majority market control in every region except the Middle East, and its brand is recognizable across the globe. Coca Cola is a great long-term investment that is likely to produce returns for the foreseeable future.
KO is currently trading at a PE ratio of 25.67, well below the SPY's PE of 38.54. Earnings are expected to shrink this period, however, 2021 is expected to bring with it a revenue growth of 10.7%. Although KO is leveraging lots of debt ($51 billion with a debt to equity ratio of 2.84), it has approximately $11 billion of cash on hand and a 9-month positive operating cash flow of $6.2 billion (January 2020 - September 2020). This should be enough to allow KO to meet its current debt obligations. It is currently outperforming estimated earnings for the 2020 period. It has purchased $7 billion in long term investments, a bullish sign for shareholders. It has also increased its dividend (currently a 3.38% yield) for 58 years straight, making it a dividend king.
The $48.50 (1) range seems to be its current demand zone, providing recent support. I expect KO to rally into the $51.50 range (2) before either encountering resistance and reversing back to support at 1, or continuing higher towards resistance at its 6 month high (3). There is a possibility that it breaks through support at 1, however, I find that to be unlikely due to how many times it has been tested (but you should always set a stop loss!).
I also believe that it's worth mentioning that the 200 EMA on the 5-year window seems to be acting as additional support:
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