MENU

Coca-Cola Amatil Ltd (ASX:CCL) shares slide lower on broker downgrade

bear win

In morning trade the Coca-Cola Amatil Ltd (ASX: CCL) share price has been amongst the worst performers.

In early trade the beverage company’s shares are down 2% to $9.38.

Why are Coca-Cola Amatil’s shares sliding lower?

With no news out of the company, I suspect that today’s decline is likely to be related to a broker note out of Citi.

According to the note, the broker has downgraded Coca-Cola Amatil’s shares to a neutral rating from buy. Citi’s analysts have also cut the price target on its shares slightly to $9.50 from $9.70.

Its analysts have made the move due to their concerns over its Indonesian and Papua New Guinea business. Citi believes that tough trading conditions will lead to weak sales and profits in these markets.

Which will be a big disappointment for shareholders as these markets are generally regarded as the company’s future growth engine.

In light of this weakness, the broker feels that any potential rerating of its shares may be delayed for the now until these markets start to deliver on their potential.

Should you buy the dip?

Based on Citi’s earnings per share forecast of approximately 54 cents in FY 2018 and 55 cents in FY 2019, Coca-Cola Amatil’s shares are currently changing hands at a little over 17x FY 2019 earnings.

I think that this is about fair value for its current growth profile and dividend yield.

As such, I wouldn’t be in a rush to buy its shares unless they were to pull back by 10% or so. At that level I would be a buyer with a long-term view.

In the meantime, consumer staples peers A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) could be good options for investors. I think both are trading at attractive prices after recent declines.

Alternatively, these top blue chip shares could be even better options in FY 2019.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Coca-Cola Amatil Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.