Should I invest in Coca-Cola shares after a positive view from Morgan Stanley?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Oct 23, 2021
  • Coca-Cola declared a $0.42 per share quarterly dividend
  • Molson Coors has signed an exclusive agreement with Coca-Cola
  • Morgan Stanley has a positive view of Coca-Cola

The Coca-Cola Company (NYSE: KO) shares have weakened from their recent highs above $57, registered in August 2021, and the current price stands at $54.45. Coca-Cola declared a $0.42 per share quarterly dividend last week, and Morgan Stanley continues to have a positive view on KO shares.

Morgan Stanley has a positive view

Coca-Cola continues to improve its position in the market, and the board of directors declared a $0.42/quarterly share dividend last week, which will be payable on December 15.

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Coca-Cola reported better than expected second-quarter results in July; total revenue has increased by 42% Y/Y to $10.1 billion, which was more than expected, while the GAAP EPS was $0.61 (beats by $0.05).

Through the second quarter, volume trends steadily improved each month, driven by the recovery in markets from the pandemic, and the company’s management expects another EPS beat in Q3.

Coca-Cola expects to deliver organic revenue growth for the 2021 fiscal year of 12% to 14% and comparable EPS growth of 13% to 15% compared with the previous year.

According to the latest news, Molson Coors has signed an exclusive agreement with Coca-Cola to manufacture, market, and distribute Topo Chico Hard Seltzer in Canada. The product is scheduled to launch in the summer of 2022, less than two years after the successful launch in the United States.

Topo Chico Hard Seltzer has garnered a 2.4% share of the U.S. market, and this deal will certainly help Coca-Cola to expand its revenue base further.

Last month, Coca-Cola introduced a new global brand platform called Real Magic with a new campaign, “One Coke Away From Each Other.” This is the first new global platform since 2016, and the company’s stability in a variety of market conditions has revealed its true staying power.

Morgan Stanley has a positive view on KO shares with a price target of $65, representing 20% upside potential. Dara Mohsenian, an analyst from Morgan Stanley, added:

The outlook for Coca-Cola remains positive; we see some headwinds from the recent increase in global COVID cases and slightly lower our FY21 topline forecasts, but remain above consensus in 22/23. We expect a return to outsized sales growth vs. peers post COVID, with improved execution and higher margins.

Technically looking, Coca-Cola shares could advance above the current price levels, but this company is not undervalued with a market capitalization of $234 billion. The book value per share is around $5, and Coca-Cola trades at more than seventeen times TTM EBITDA.

$60 represents strong resistance

Data source: tradingview.com

Coca-Cola shares have weakened from their recent highs above $57, and if the price falls below $50 support, the next target could be at $45. On the other side, if the price jumps above the strong resistance that stands at $60, the next target could be at $65 or even above.

Summary

Coca-Cola shares have weakened from their recent highs above $57, but Morgan Stanley continues to have a positive view on KO shares with a price target of $65. Coca-Cola continues to improve its position in the market, but this company is not undervalued with a market capitalization of $234 billion.

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