November update: should you buy or sell Coca-Cola?

Written by:
Stanko Iliev
17th November, 18:58
Updated: 17th November, 18:59
  • Some analysts see the valuation of Coca-Cola at bubble levels
  • The business of the company is impacted by the Covid-19 pandemic
  • If the price falls below $50 that would be a “sell” signal and we have the open way to $48

Coca-Cola shares (NYSE: KO) shares have advanced from $47.3 above $54.5 in less than thirty days and the current price stands around $53.4. Pharma company Moderna announced that it has a prospective vaccine which is 94.5% effective in preventing the COVID-19 and this gave a further support to Coca Cola shares.

Fundamental analysis: Coca-Cola is a stable company but the price could weaken again

The Coca-Cola Company is an American multinational beverage corporation headquartered in Atlanta. The main business of this company is the manufacturing, retailing and marketing of nonalcoholic beverage concentrates and syrups. The company is well known for its famous drink Coca-Cola and for the fact that it has increased dividends each year for 57 years.

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The US stock market hit a record this week thanks to news from pharma company Moderna saying its prospective vaccine was 94.5% effective in preventing the COVID-19. The stocks are also supported with signs of economic recovery in Asia and jump in oil prices.

Coca Cola shares have advanced this week above $54.5 and the technical picture implies that the price could advance even more in the upcoming days. Some analysts see the valuation of Coca-Cola at bubble levels but despite this, Coca- Cola could be a very good opportunity for short-term traders who are trading with “stop-loss” and “take profit” orders.

The next several months will be competitive for the beverage industry and the price of Coca-Cola shares could also weaken in the upcoming weeks. The business of the company is impacted by the coronavirus Covid-19 pandemic environment and business is still struggling to recover to pre-Covid levels.

Coca-Cola reported that total revenue fell 8.4% in Q3 and the company lost value share in total non-alcoholic ready-to-drink beverages. Coca-Cola CEO James Quincey said that the company has not seen demand return to pre-pandemic levels, even in markets where the coronavirus is mostly under control.

The company is cutting jobs and it will create new operating units focused on regional and local execution. This is a part of the overall reorganization and Coca-Cola will offer employees an option to take a voluntary separation package.

If we compare total stockholders’ equity of $20.3B and the market capitalization of $231B, we can notice that this stock is overvalued and maybe it is not the best moment to invest in Coca-Cola shares.

Technical analysis: Bulls are in control of the price action

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $50, $48 and $46, $55 and $58 represent the resistance levels. If the price jumps above $55 it would be a signal to buy Coca-Cola shares and we have the open way to $58.

Rising above $60 supports the continuation of the bullish trend and the next price target could be located around $65. On the other side, if the price falls below $50 it would be a “sell” signal and we have the open way to $48.

Summary

The US stock market hit a record this week thanks to news from pharma company Moderna saying its prospective vaccine was 94.5% effective in preventing the COVID-19. Coca-Cola shares have advanced above $54.5 and the technical picture implies that the price could advance even more in the upcoming days. If we compare the total stockholders’ equity of $20.3B and the market capitalization of $231B, we can notice that this stock is overvalued and maybe it is not the best moment to invest in Coca-Cola shares. The business of the company is impacted by the coronavirus Covid-19 pandemic and the next several months will be competitive for the beverage industry.

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