Morgan Stanley Upgrades Coca-Cola, Sees More Growth Ahead

Coca-Cola Co KO has reacted well to changes in the beverage marketplace and upped its pricing power just as emerging market trends appear to be rebounding, Morgan Stanley analysts said Tuesday.

But investors don’t seem to have responded yet, making the stock a good buy.

The Analyst

Morgan Stanley’s Dara Mohsenian upgraded Coca-Cola from Equal-Weight to Overweight and raised the price target from $52 to $55.

The Thesis

Coke has become a structurally higher topline growth company, Mohsenian wrote in a note, but investors don’t seem to have noticed. The resulting undervaluation provides a compelling buying opportunity.

Coke also has increased its pricing power in recent years, which Mohsenian said appears sustainable.

On top of that, the company, under CEO James Quincey, has done a good job of making itself more nimble and of taking more of a “total beverage focus” that should allow Coca-Cola to take advantage of higher growth in non-carbonated drink categories, he wrote. (See the analyst's track record here.)

Morgan Stanley is projecting higher long-term topline growth for Coke than its peers and lessening headwinds that may make it the right time to have some Coke stock, and a smile.