A Strategical Change Set To Revive Growth At Coca Cola

  • Coca Cola remains a good long term investment
  • Stock stagnation and little room for growth
  • Good long term investment due to low probability for good short term returns

Traditionally, Coca Cola (NYSE:KO) stock has been a sensible long-term investment. However, due to a consumer trend towards healthier food consumption, sales of carbonated drinks have been on the decline since 2005. Despite this, Coca Cola continues to battle against the tide. However, one wonders how long this battle can continue.

At the time of writing Coca Cola’s share price sits at $39.71. And looking back over the past 3 months, it has been fairly volatile as it peaked in August at $42.12. It is worth noting that Coca Cola has such a big command of the beverages industry, that there is little wiggle-room for growth. The volatile nature of the stock is partly due to the competitiveness of the beverage industry, and how sales are strongly linked to partnerships, the weather, and consumer spending power.

For instance during the global recession of 2008, Coca Cola stock plummeted from $29.63 on February 1st 2008 to $19.55 on March 6th 2009. As faith in the economy recovered, so did Coca Cola sales, and it has been on a climb from that point to being in the high 30s in the current economy.

KO stock chart

Source: Coca Cola stock price data by amigobulls.com

Historically, Coca Cola’s stock tends to do well during the summer months and around global sporting events such as the Fifa World Cup. This is partly due to increased advertising spend, and therefore sales during such events. Coca Cola’s message of kicking back with a Coke is so well ingrained in society that it is little suprise that such trends are the case.

In order to see what Coca Cola has in stock for investors, it is worth analyzing the presentation of their new COO at the ‘Barclays Global Consumer Staples Conference’ on September 9th, 2015.

James Quincey is the new COO and President of Coca Cola. He was confident that Coca Cola can grow by 35% in the next five years. He attributes this to additional retail value and a growing demand for their distinctive non-alcoholic beverage. Interestingly, he detailed their growth rate projections of a staggering 35% over the next five years. One can look at that in two ways. Firstly, this could be a rhetoric to try and show investors that Coca Cola is still a strong stock to invest in. On the other hand, this may be a sign of upcoming aggressive marketing and innovative developments- both good things to look out for in a company.

He certainly talks the talk of a man with a detailed plan because he went on to delve into the changes he wants to make at Coca Cola which should make it run more efficiently. As we are all aware, efficiency is a great thing. Plus, he wants to hone in on Coca Cola’s strategy on a country-by-country basis instead of making blanket decisions, which may be easier to implement but can leave a business stretched thin. If he is able to execute all of his promises, there is no doubt that Coca Cola will increase the gap on its competition.

In an interesting investment twist, Coca Cola has collaborated with Keurig Green Mountain (NASDAQ:GMCR) to introduce a machine named “Keurig Kold”. The shocking thing is that this allows anyone to make Coca Cola, Sprite, and other carbonated sugary drinks at home. At a price of $369.99, it is being pitched at the business and high-end consumer market. The question is: Isn’t Coca Cola shooting themselves in the foot by doing this? For such a big development, the stock went up by just 0.08% after the announcement. They have a 16.8% stake in Keurig Green Mountain.

In conclusion, Coca Cola is still a solid buy stock. The net income growth has outperformed not just the beverage industry but also the S&P 500 as a whole. To put it into financial perspective, it grew from $2,595 million (2014- 3rd quarter) to $3,108 million (2015-3rd quarter). Strong fundamentals combined with a change in strategy make Coca Cola stock an attractive long term investment .

Show Full Article
5 2
Is this article helpful ?    


Author's Disclosures & Disclaimers:
  • I do not hold any positions in the stocks mentioned in this post and don't intend to initiate a position in the next 72 hours
  • I am not an investment advisor, and my opinion should not be treated as investment advice.
  • I am not being compensated for this post (except possibly by Amigobulls).
  • I do not have any business relationship with the companies mentioned in this post.
  • See Amigobulls' policy on anonymous authors who use a pseudonym
Amigobulls Disclosures & Disclaimers:

This post has been submitted by an independent external contributor. This author may or may not hold any positions in the stocks discussed. Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. Amigobulls has not verified the author’s positions in the stocks discussed, and does not provide any guarantees in this regard. The author may be paid by Amigobulls for this contribution, under the paid contributors program. However, Amigobulls does not guarantee the authenticity or accuracy of the information provided by the author in this post.

The author may not be a qualified investment advisor. The opinions stated in the post should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Amigobulls does not have any business relationship with any of the companies covered in this post. This post represents the views of the author/contributor and may not reflect the views of Amigobulls.

At Amigobulls, we prefer that our authors disclose their real names. However, due to a variety of reasons, author's may prefer otherwise. Recognizing the fact that the ideas conveyed carry greater significance, and to facilitate the dissemination of these ideas, we allow authors to use a pseudonym. However, we do collect the same of details from anonymous authors, as we do from others, like the author's real name and contact information. Of course, this information remains confidential with us, and is not displayed on the site.
Further, to protect the interests of our readers/viewers, anonymous authors are required to make the same set of disclosures as other authors. For more details, you can write to any of our in-house editors at contributions@amigobulls.com.

show more

Comments on this article and KO stock

Do share this awesome post