Investing.com – The pullback in Coca-Cola's (NYSE: ) stock price is an “overreaction” among investors to volume concerns and worries over the impact of the Trump administration's upcoming trade policies, according to analysts in TD Cowen.
The drinks giant's chief executive James Quincey warned in October that it was seeing lower volumes in China and the Middle East. China, in particular, has been hit by a slow post-pandemic recovery that has struggled to fuel consumer spending, while ongoing conflicts in the Middle East have slowed the flow of exports to the region.
The comments caused concern among investors, with shares in Coca-Cola sliding at the time. The stock fell 9%.
However, Coca-Cola also said it is still pushing to reach the highest level of organic sales in 2024, thanks in large part to strong demand in the US despite the jump in prices for its sodas and juices. Annual organic sales are now seen increasing by around 10%, up from previous guidance of an increase of between 9% to 10%.
Meanwhile, retail prices increased by 10% in the third quarter, although unit volume decreased by 1%.
In a note to clients who raised their rating of Coca-Cola stock to “buy” “hold” and reiterated their price target of $75, TD Cowen analysts led by Robert Moskow argued that Coca-Cola “continues to top the game its” successful restoration efforts in Vietnam, the Philippines and India. In the US, which accounts for about 37% of Coca-Cola's total sales, its implementation has been “excellent”, they said.
Analysts say the company's volume issues are then “overwhelming.” Meanwhile, various worries about the potential impact of the incoming Trump administration's import tax plans on foreign exchange rates and their performance in emerging markets are “bad”, due in part to the strengthening of Coca-Cola's Mexican unit. Some consumer goods competitors pointed to possible economic pressure on the country due to Trump's trade stance.
As a result, the recent drop in Coca-Cola's share price has been “excessive,” they said.
“This creates an attractive buying opportunity for a stock that has plenty of room to capitalize on growing per capita beverage consumption in international markets over the long term,” say analysts.