Greenpeace accuses Coca-Cola of adding to pollution
Higher than anticipated revenue and earnings in Q4-2016 pushed the stock price of Coca-Cola Company (NYSE: KO) to a high of $42.84 last week. The uptrend was also aided by an organic revenue growth outlook of between 3% and 4% in fiscal 2017.
Still, the recent news related to the company, provided below, discourages investment in the stock.
We anticipate the stock to remain range bound with bearish bias in the short-term.
Greenpeace, in a report published last week, has stated that the food and beverage giant sells about 100 billion throw away bottles every year and it is creating huge pollution and litter problem. Greenpeace says that as many as 15-16 million plastic bottles add up to the garbage every day.
The organization has also accused Coca-Cola of failing to meet its own recycling target. Furthermore, Greenpeace pointed out that Coca-Cola is no way near its target of recovering and recycling 75% of bottles it sells in developed countries by 2020. In fact, a recent assessment indicated that the recovery and recycling percentage have gone down to 59% in 2015, from 63% two years earlier. The campaign group is of the opinion that the situation is alarming considering the fact that single-use plastic bottles now account for 60% of the Georgia-based company’s global packaging. The company has also failed to meet its target of sourcing 25% of its plastic bottle requirement from renewable or recycled sources in 2015, Greenpeace said. More importantly, Greenpeace pointed out that Coca-Cola has not provided any kind of an update to its global recycling target.
In an attempt to simplify customer’s choice between sugar and sugar-free versions, Coca-Cola has decided to pull Coke Life, known for its green packaging, from the UK shelves in June. The decision was also taken after the sales went flat last year. The sales of the low calorie drink, sweetened mainly from plant extract stevia, has declined 58% to £8.8 million in 2016. Thus, fundamentally, we can expect the news to keep the stock of Coca-Cola under pressure.
The stock of Coca-Cola is facing heavy resistance at 42.70, as shown in the chart below. The MACD indicator has also formed a negative divergence with the price movement. This indicates the possibility of a correction in the price. So, speculating on a downtrend seems to be the best option as of now.
A binary trader can gain from the stock’s decline by investing in a put option or its equivalent contract. The option can be bought when the stock trades near $42.50 in the NYSE. Furthermore, selecting an expiry date around April 20th would boost the chances of success in the trade.
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