The stock has been falling for the fourth consecutive day, following the beverage giant’s fourth consecutive decline.
On Thursday, JPMorgan analyst Andrea Teixeira cut its rating on neutral on Coca-Cola (ticker: KO) from Neutral while maintaining a price target of $ 50.
Some analysts have been focused on the slow-to-expect epidemic for Coke – which gets a good deal of its business from people buying products away from home – while others have focused on its potential tax woes Have done Teixeira is in the latter camp, writing that his downgrade he sees as an increased risk that Coke loses his current tax dispute with the Internal Revenue Service.
In November, the US Tax Court ruled against Coke, a decision that meant the company faced a $ 3.3 billion tax bill related to the issues from 2007 to 2009. As stated by Teixeira, the problem stems from a dispute about the parties’ formula of whether Coke previously agreed to reduce Coke’s profits from operations overseas when compared with its bottlers.
She still believes “Coke has a strong case,” but warns that there is a risk that this tax liability could be “more than triple” if the IRS applied the same tax treatment for years beyond 2009 is. This would be equivalent to about $ 1 billion a year. For seven years, after which it will be lower.
Teixeira to hire coke former US federal judge and was hearty to watch
(BA) General Counsel as Consultant and Special Adviser j. Michael Lutig, but while it is a positive step, also confirms that “the risk is increasing, and so we are taking a break.”
Over the long term, Teixiera writes that she still likes the core principles of Coke and believes that the company will emerge stronger from the Kovid-19 epidemic. Still he worries that the tax overhang will be a headwind for the good part of 2021 and the company may be forced to put $ 3.3 billion in escrow.
Coke shares were down 0.8% at $ 50.14 in recent trade.
Was up 1.5%. According to FactSet, less than 60% of analysts covering coke are now bullish on the stock; Compared to about three-quarters of those who were in December.
Baron’s Is more excited about Coke’s prospects.
Write Teresa Reeves at [email protected]