By Sam Boughedda
Morgan Stanley analyst Dara Mohsenian reiterated an Overweight rating and $76 price target on Coca-Cola (NYSE:KO) Monday.
In a deep dive on the beverage company, the analyst said in a note to investors that a new detailed analysis shows "consensus revenue remains too low not only in 2022, but also in 2023."
"Coke's pricing power and away from home recovery post-COVID drives much better KO near-term visibility than CPG peers," he added.
Outlining key drivers for the Overweight rating, Mohsenian explained: "We continue to have a high degree of conviction that Coke will post above-consensus topline growth in both 2022, updating our existing analysis, as well as in 2023, with new detailed line-item analysis. We see 150 bps of total organic sales upside for 2023, which is substantial for a large cap Staples name."
Morgan Stanley sees EPS visibility as higher at Coke than peers "given 2022 revenue upside, stronger pricing power with limited demand elasticity, and a more manageable cost/demand elasticity vs. pricing gap."
"We still see Coke valuation as attractive. While Coke's stock is the best performer in our group in the LTM, up 13% and outperforming the S&P 500 by 1,500 bps, we point out that its outperformance vs. its large cap peers was entirely driven on a relative basis by KO's favorable relative EPS revisions rather than relative multiple expansion, as KO's stock performance has outpaced its EPS revisions by 800 bps."
The analyst concluded that beverages is their preferred sector due to more substantial pricing power and higher secular topline growth.