CA - Coca-Cola: Don't Bet Against A Wonderful Business

2024-06-01 08:30:00 ET

Summary

• The Coca-Cola Company is a fundamentally strong business with solid pricing levers to mitigate inflation challenges.
• The company has observed a shift in consumer behavior due to worsening purchasing power, but overall demand remains robust.
• Coca-Cola's pricing growth is expected to normalize as it refocuses on driving volume growth.
• The Coca-Cola Company's enhanced digital capabilities could drive efficiency gains and unveil new growth opportunities through AI.
• I argue why the stock isn't cheap, but its valuation seems justified. The Coca-Cola Company also looks ready to break out of its $65 zone. Read on.

Coca-Cola Is A Fundamentally Strong Business

The Coca-Cola Company ( KO ) is a fundamentally strong consumer staples sector ( XLP ) company. With its globally well-diversified revenue base, Coca-Cola has managed to capitalize on solid pricing levers to mitigate the inflation challenges. However, Coca-Cola isn't immune to currency headwinds, although they aren't expected to impact KO's long-term model. Moreover, Coca-Cola expects inflation headwinds to moderate moving forward, as Coca-Cola anticipates "a more normalized pricing environment in 2024." As a result, it should provide a more balanced price/volume growth roadmap from 2024 as KO refocuses its execution through more robust underlying volume growth improvements....

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