J.P. Morgan Downgrades Coke to Neutral; Overweight Pepsi

J.P. Morgan’s analyst, Andrea Teixeira said that investors ‘should be worried’ about Coca Cola’s future with regards to the potential tax loopholes it is currently facing after the firm downgraded its rating from “overweight” to “neutral”. As stated by Teixeira, the announcement of Coke about hiring a judge, could potentially mean that there’s something big going on that needs to be discussed in the court.

The Coca-Cola Company (KO), is a global beverage corporation that was founded in 1886. Coca-Cola continues to develop its offerings over time, through its more than 700,000 employees around the world, the company was able to expand its infrastructure, and come up with new products that have reached almost every part of the globe.

Coke is expected to do better as restrictions are being lifted since it is considered to be a ‘reopen’ stock. So far, the company is doing great in terms of marketing and innovating its products, as well as having great operating margins and cost controls but its been down for the first 4 trading days of 2021. 

Andrea Teixeira emphasized that Coca-Cola belongs to their ‘long-term’ stock picks because it is showing great signs fundamentally. “The difference between Pepsi and Coke is that I don’t think that Pepsi will have that ‘overhang’ in the tax form and Pepsi has less exposure to its premises, about 15%-17%. So there will be less of a benefit there”, she said, talking about the different situations of the two big beverage companies at the moment.

On a final note, Andrea said, “I think that Pepsi relatively is a better stock here into the print. We have an overweight rating on Pepsi.”. In J.P. Morgan, an ‘overweight’ rating of a stock means, they envision it to grow massively beyond the average total return of stocks in a certain coverage bracket over the next 6-12 months. Their ‘neutral’ rating on Coke means, for the next 6-12 months, they anticipate the stock to execute moderately in line with the average total return of stocks in a specific coverage category.