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Is the Coca-Cola Amatil share price in the buy zone?

The Coca-Cola Amatil Ltd (ASX: CCL) share price has managed to avoid being dragged lower with the rest of the market on Tuesday and is flat at $8.31 in late morning trade.

The beverage giant appears to have found some support today after a leading broker took its sell rating off its shares.

What happened?

According to a note out of the Macquarie Group Ltd (ASX: MQG) equities desk, its analysts have taken their underperform rating off Coca-Cola Amatil’s shares and upgraded them to a neutral rating.

The broker has also lifted its price target slightly to $8.28, roughly in line with its current share price.

Macquarie made the move after its share price underperformance led to valuation support emerging. The Coca-Cola Amatil share price is roughly flat since Christmas Eve compared to a 6.5% gain by the ASX 200.

However, the broker isn’t quite ready to make a buy recommendation on its shares just yet due to the tough trading conditions facing its key Australian beverages business and the expectation that FY 2019 will be another year of transition.

This view is echoed by analysts at Credit Suisse as well. Last week it retained its neutral rating and reduced the price target on its shares to $8.90.

Although the broker expects its earnings growth to resume in FY 2020, it appears to see better options elsewhere.

Should you invest?

I would have to agree with both Macquarie and Credit Suisse on Coca-Cola Amatil. Although I wouldn’t be a seller if I owned shares, I wouldn’t expect it to be a market beater in 2019 so I’m not in a rush to invest.

As a result, I intend to keep it on my watch list and reassess the company and its prospects at the end of FY 2019. In the meantime, I would sooner buy sector peer A2 Milk Company Ltd (ASX: A2M) ahead of it.

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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.

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