- 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.
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 .