What happened
It's a good news, bad news kind of a day today for investors in Coca-Cola (KO 0.19%). The good news is that one Wall Street analyst raised its price target on Coke stock this morning to a few dollars more than it cost at the end of 2020. The bad news is that a different analyst just downgraded Coca-Cola stock.
And in afternoon trading, the bad news is winning. As of 12:40 p.m. EST, Coke stock is down 5%.
Image source: Getty Images.
So what
That's not too surprising, however, given how half-hearted the recommendation from Coke's fan was. Jefferies this morning raised its price target on Coca-Cola stock, but only to $57 a share (so only 4% above where the stock closed on Thursday). And according to StreetInsider.com, Jefferies didn't even raise its rating on the stock, which stays at hold.
In contrast, Coca-Cola critic RBC Capital set only a $55 price target on Coke shares, essentially predicting that the stock will not move at all this year. Warning that "valuation is near-full" already, RBC also downgraded the stock to "sector perform" (which is basically another hold rating).
RBC worries that "the negative implications of COVID [will] last longer than" most investors are assuming right now. And if Coke disappoints as RBC expects it to, the analyst sees little prospect for "upwards EPS revisions ... over the next few quarters."
Now what
In essence, what RBC is saying is that Cola-Cola is a fine company and "continues to make the right long-term decisions" for its future. Regardless, with the stock up 21% over the last six months, most of the optimism about Coke stock has already been baked into the stock price, and Coke is more likely to disappoint investors from here on out than to deliver positive earnings surprises.
At a valuation of 28.4 times trailing earnings, and earnings projected to grow only 2% annually over the next five years, Coke stock simply isn't "it" for value investors anymore.
