Wall Street is a constant tug of war between optimists and pessimists or as industry parlance has it – the struggle of bulls vs. bears.
The last few weeks have seen a stream of updates from the iconic beverage maker as it embarks on a series of restructuring initiatives to improve overall operations.
Compared to the present “more vertically and geographically siloed” set up in which business unit leaders report to their respective group presidents, the new system will feature all operating unit leaders reporting directly to President & COO Brian Smith, thereby improving communication and decision making across the organization’s global network.
The series of announcements have opened debates amongst investors. The bears have questioned “the pacing of sequential improvement” and have viewed the restructuring announcements as “a knee-jerk reaction to persistent away-from home headwinds.” At the other end of the scale, the bulls have taken a more optimistic view of the “sequential improvement prospects,” and believe the reshuffling is “further validation that the company will emerge from current COVID-19 conditions stronger and more profitable.”
So, who does Powers side with?
“For our part,” the 4-star analyst said, “We continue to side with the bulls--viewing quarter-to-date commentary from KO and its bottling partners as generally validating of go-forward demand prospects, and seeing KO's restructuring as a welcome acceleration of promising change that was already afoot within the Coke System pre-pandemic.”
Powers also notes that according to the company and its bottling partners, due to the coronavirus’ hit “calendar 2Q20 is likely to reflect the most adverse impact on revenue generation.”
Looking ahead to a post-pandemic climate, the analyst believes KO represents “an underappreciated play on global reopening and recovery over the next 12+ months.”
Accordingly, Powers reiterated a Buy rating on KO shares along with a $55 price target. Should the figure be met, investors could be pocketing a 8% gain. (To watch Powers’ track record, click here)
There is widespread agreement amongst Powers’ colleagues. Based on 9 buys and 1 Hold, Coca-Cola has a Strong Buy consensus rating. At $54.7, the average price target comes in just under Powers’, and could provide returns of ~8% over the coming months. (See Coca-Cola stock-price forecast on TipRanks)
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