Through Berkshire Hathaway (NYSE: BRK.A), Warren Buffett has built a reputation for picking long-term stock market winners and building a portfolio that thrives in different economic phases.
However, even his most trusted investments remain susceptible to short-term technical signals that suggest possible trouble ahead.
Now, Coca-Cola (NYSE: KO), one of Buffett’s favored stocks, accounting for 8.4% of his portfolio, has formed a ‘death cross‘ for the first time since July 2023 – a bearish signal when the 50-day moving average (MA) dips below the 200-day moving average.
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Notably, the last time this happened, KO shares tumbled 18% to their lowest levels since March 2021.
What next for KO stock?
This technical setup often reflects weakening momentum and growing bearish sentiment. With KO trading at $62.55 in the latest trading session, the equity looks to sustain the downward pressure.
The stock sits beneath the eight-day simple moving average (SMA) at $62.88, the 20-day SMA at $63.21, the 50-day SMA at $64.84, and the 200-day SMA at $64.95. This alignment positions KO in a decisively bearish zone as each moving average acts as a resistance level.
Analysis from a technical analyst with the pseudonym Jtrade reinforced the possibility of further downside. In an X post on December 20, the analyst observed that Coca-Cola’s stock had formed a bearish descending triangle pattern, indicating the potential for continued decline.
The pattern indicates that sellers are steadily gaining control, as demonstrated by the series of lower highs near the $64 to $65 level. Meanwhile, the flat support zone around $60-$61 shows buyers hold a crucial price point; however, a break below this level could trigger a substantial downward move.
Meanwhile, Wall Street analysts at TipRanks have given Coca-Cola a ‘Strong Buy’ rating, with a 12-month average price target of $75.17. This suggests a potential upside of 20.18% from its last price of $62.55.
The forecast is based on evaluations from 14 analysts, who have set price targets ranging from $70 to $85.
Coca-Cola’s key fundamentals
Despite the bearish technical setup, Coca-Cola still has notable fundamentals that nearly guarantee possible future growth. Top on the list is the company’s diverse portfolio combined with its global brand recognition, which provides a strong foundation for its resilience and stock growth.
The company is also on an expansion drive that has seen Coca-Cola spend money on strategic acquisitions. For instance, on December 20, the beverages giant agreed to acquire Billson’s Beverages’ ready-to-drink spirits business after the company went into administration in July. The deal includes products like Vodka with Tangle, Vodka with Grape Burst, and Vodka with Portello.
At the same time, by adapting to health trends with low-sugar options, the company seeks to evolve and meet changing consumer needs.
Indeed, the bearish sentiment comes after the firm recorded impressive earnings for the third quarter. Specifically, Coca-Cola’s revenue dipped 1% year-over-year to $11.85 billion, beating analysts’ $11.61 billion estimate, while organic revenue surged 9%.
Net income dropped 8% to $2.8 billion (66 cents per share), with adjusted earnings at 77 cents per share, surpassing expectations.
Analysts forecast Coca-Cola will report revenues of $46.01 billion for the current fiscal year.
These fundamentals position the company for potential long-term growth and resilience while continuing to attract investors through other factors, such as its dividend payout track record.
Featured image via Shutterstock
