- Coca-Cola shares are yet undervalued.
- A global recession appears highly possible.
- $50 represents a massive support zone.
The Coca-Cola (NYSE: KO) shares have deteriorated by nearly 10% since 25 August 2022, trading at $58.60 during this publication. Moreover, the stock seems primed for further dips. Such developments will showcase if the United States stock market enters an intensified correction phase.
Global Recession Highly Likely
Coca-Cola presented a quite positive performance during Q2 2022. That saw the company reporting profit and revenue higher and economists’ consensus predictions. Total volume noted an 11.9% year/year uptick to $11.3 billion, representing $730 million beyond expectations.
Meanwhile, the non-GAAP earnings/share stood at $0.70, beating by $0.03. Though the company boasted an impressive market position plus high pricing control, KO shares are yet to undervalue. Moreover, it might not be the best time to invest in Coca-Cola.
Though the company has proven aristocracy with 60 years of consecutive payout surges, the present 3% dividend yield isn’t lucrative to accept, considering escalating global headwinds.
The P/E (price-to-earnings) ratio of 26.5 shows Coca-Cola stands on the market’s pricier side, considering that multiple firms on the United States stock market currently boast P/E ratios of below 15.
According to the market revenues/capitalization (price-to-sales) ratio, KO shares trade at 6.82 = 2x higher than PepsiCo’s price-to-sales ratio, with PEP trading at around 2.84 P/S.
Meanwhile, Coca-Cola trades at over 19x TTM EBITDA, whereas PepsiCo at 15-times TTM EBITDA. Coca-Cola has to outshine the market in growth to validate its present valuation. However, that wouldn’t be easy.
Both firms report impressive demand for their dink sectors. Nevertheless, beware that PepsiCo recorded an impressive 55.78% growth in international markets, whereas Coca-Cola’s growth stood at 12.31% (according to Q2 reports).
Analysts expect Coca-Cola to report $10.48 billion in revenue during its third quarter call (26 October 2022), indicating a 4.38% year-on-year growth. Moreover, they expect $1.85 EPS (earning per share), representing a 2.31% increase.
Technical Analysis
Coca-Cola had its share weakening by nearly 10% since 25 August. That had the price moving beneath the 10d moving average, suggesting it hasn’t bottomed.
A price drop beneath the support at $55 would confirm a sell sign, targeting the foothold at $50. Meanwhile, upsides past $65 would reveal a trade signal with the resistance at $70 as the upward aim.
Editorial credit: Mizin Roman / shutterstock.com