A Goldman Sachs analyst cut her rating on The Coca-Cola Co. to "Neutral" from "Buy," citing factors such as slowing growth and increased pressure from competitors such as PepsiCo Inc. at home and abroad.
THE OPINION: Analyst Judy Hong said in a note issued Sunday that she expects Coca-Cola's stock to "take a pause in the near term" after a streak of outperforming its peers.
While Coke dominates the soda category, Hong also noted that the Atlanta-based company's performance has been moderating in the U.S. and that the company is not as strong in faster-growing categories such as energy drinks and ready-to-drink teas.
In Europe, she noted that Coke's share in carbonated soft drinks has been under pressure in part because of PepsiCo's increased promotional activities. And although Coke remains dominant in China, she noted that PepsiCo's recent alliance with Tingyi to distribute its drinks could intensify competition.
Since adding Coca-Cola to Goldman's "Buy" list in October of 2010, Hong noted that shares have increased nearly 33 percent, versus 21 percent for the Standard & Poor's 500. Over the past year, however, Coca-Cola shares are up 23 percent, versus 25 percent for the S&P 500.
Hong noted that the company also faces unfavorable foreign currency exchange rates and a challenging economy. Over the long term, she said, Coca-Cola should continue to deliver solid growth, given its presence in emerging markets. A spokesman for the Coca-Cola Co. declined to comment.
THE STOCK: Shares of Coca-Cola were down 26 cents at $39.14, after the company's 2-for-1 stock split took effect before the market opened.
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