Coca Cola Company: Brief Comment

A BRIEF COMMENT ON "THE COCA-COLA COMPANY"

As i approached to analyze discretionary sector, in specific beverages alcoholic and non-alcoholic as a reopen trade, i made a complete analysis on The Coca-Cola Company ( not publicly sharable ), and a brief quantitative review (as you can see right down) so here is my overall comment:

Operating margin: 2020 2Q -28%

2020 3Q -27%

2020 4Q -27%

2021 1Q -30%

Net margin: 2020 2Q -25%

2020 3Q -20%

2020 4Q -17%

2021 1Q -25%

Value at risk (1% worst case scenario) - 2020 3Q 2,98%

2020 4Q -3,00%

2021 1Q -2,99%

So here is my comments about the analysis:

- A strong decline on revenue is the main cause of the rise in pricing power

- In a Risk Reward ratio the best are MNST and FIZZ

- A look on PE Ratio:

2020(A)-30,5

2021(E)-26,4

2022(E)-24,3

This forecasted pe decline is caused by a forecasted share price decline, and a forecasted rise in earnings per share caused by the re-open

In fact Earnings per share:

2020(A)-1,8

2021(E)-2,1

2022(E)-2,3

- After this analysis I'm more inclined to analyze a possible buy action in Monster Beverage

- Keep an eye on the reopen and reflect on this:

The reopen comes after a series of lockdowns that caused health problems both to those who contracted the virus and to those who simply suffered from a sedentary lifestyle. This scenario will lead people to join more fitness clubs and fitness lifestyle, which will lead to a lower demand for products considered unhealthy

To this view you have to add:

- The sugar tax in many European States where the company produces about the 16.80% of the revenue

- In the US no state currently has an excise tax on sugar-sweetened beverages but there are soda taxes in Boulder, Colorado; the District of Columbia; Philadelphia, Pennsylvania; Seattle, Washington; and four California cities: Albany, Berkeley, Oakland, and San Francisco

- APAC has sugar taxes where the company makes 12.80% of the revenue

- Bottling segment that is 19% of the revenue, will eventually face problems in fact on January 2021, European Parliament approved a new law banning single-use plastic items such as bottles, plates, cutlery, straws and cotton buds sticks.

This plastic reduction will lead to an increase in the production of glass products, which are notoriously more expensive, so an increase in cost of revenue.

Concluding: Even considering the reopen that will only show the cards for a few months or even a year, but after that we will face a normalization of the economy, my view on KO is neutral.

I add that this business of the sugar beverages and so on will change a lot in next years. We are not anymore in 1950 when you could smoke in a Hospital and drink sugar beverages as a medicine.

Times are changing, so even the giants have to change.