New Price Target for Coca-Cola as Tariff Message Beats Pepsi
Coca-Cola beats earnings and reiterates full-year guidance as tariff anxiety breaks a rival.
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This is a big week for Warren Buffett fans. On May 4, Buffett’s investment company, Berkshire Hathaway BRK.B, is scheduled to hold its annual shareholder meeting in Omaha, Nebraska.
Buffett has been running the holding company since 1965. Earlier this week, we unveiled a new price target for shares of Berkshire Hathaway.
Berkshire Hathaway currently holds approximately 400 million shares of Coca-Cola KO. This makes the stock Berkshire’s fourth-largest position, behind only Apple AAPL, American Express AXP and Bank of America BAC.
Coke Is Boosting the Dow Jones
Coke is a component of the Dow Jones Industrial Average. The venerable 30-stock Dow Jones has been the best performing U.S. stock index this year, with a loss of just 4.6%.
Meanwhile, Coke is beating the index handily, gaining 17% year to date.
Coca-Cola reported earnings on Wednesday morning, but it was the conference call that followed that provided investors with significant insight into the company’s future. Investors liked what they heard, and pushed the stock higher by 0.8%.
Let’s take a closer look at Coca-Cola, including a detailed look at Coke’s chart to see where the stock is headed next:
Coke Sizzles While Pepsi Fizzles
In this volatile market, there aren’t many stocks hitting 52-week highs. That’s exactly what Coca-Cola did last week, closing at an all-time high of $73.90 on April 22.
Coca-Cola gapped lower on Tuesday morning after beating earnings estimates by a penny per share. Both earnings and revenues were higher than expected, but only by a small margin.
Why did investors sell Coke at the opening bell? They were probably waiting to hear comments similar to those expressed by rival PepsiCo PEP last week.
PepsiCo lowered its earnings guidance for the year, citing weak consumer demand and the potential effects of tariffs on prices and supply chains. You can read more about PepsiCo’s earnings and guidance here.
In sharp contrast to Pepsi, Coca-Cola reiterated its full-year guidance, and declared that tariff disruptions should be manageable. This caused the stock to bounce sharply from its 50-day moving average (blue line).
Candlesticks and Patterns
Tuesday’s price action also created a bullish engulfing candlestick pattern (shaded yellow). This pattern negated Monday’s price action, and set the stock up for a run to its recent highs.
A nascent A-B-C-D pattern is also visible on the chart (black lines). This pattern gives us a price target of $78.50 for Coca-Cola.
A Coke and a Smile
Berkshire Hathaway first purchased shares of Coca-Cola in 1988. In all the years since, Buffett and Berkshire have never sold a share of the Atlanta, Georgia-based beverage giant.
At the time of publication, Ponsi had no positions in any securities mentioned.
