Given the uncertainty around interest cuts and ongoing macro challenges, investors can consider gaining some exposure to certain mega-cap stocks that can deliver attractive long-term returns. Mega-caps are stocks with a market capitalization of more than $200 billion. These stocks are associated with large, well-established companies with solid track records and generally rank among the leading players in their respective industries. Using TipRanks’ Stock Comparison Tool, we placed Coca-Cola (NYSE:KO), Alphabet (NASDAQ:GOOGL), and Tesla (NASDAQ:TSLA) against each other to select the best mega-cap stock, according to analysts.
Coca-Cola (NYSE:KO)
Shares of beverage giant Coca-Cola have advanced nearly 9% year-to-date. The company delivered better-than-expected first-quarter results, reflecting the resilience of its offerings despite a tough macro backdrop. Revenue grew 3% year-over-year to $11.3 billion, while adjusted EPS (earnings per share) increased to $0.72 from $0.68 in the prior-year quarter.
Coca-Cola’s Q1 results gained from higher volumes and price hikes. The company increased its full-year organic revenue growth guidance to 8% to 9%, up from the previous outlook of 6% to 7%. Overall, Coca-Cola’s robust organic revenue growth pace, pricing power, and extensive geographic presence are helping it deliver consistent performance.
Is KO a Good Stock to Buy?
On May 22, Argus analyst Chris Graja reiterated a Buy rating on Coca-Cola stock and increased the price target to $72 from $70. The analyst thinks that the company’s innovation has helped in improving its portfolio with focus on brands that are more profitable.
Graja also noted that Coca-Cola has been refranchising its bottling operations to boost its margins. He also believes that despite several headwinds, Coca-Cola has the ability to adapt to changing needs and keep consumers engaged with its brand and offerings. He concluded that the beverage company looks stronger than it did at the beginning of the pandemic.
With 12 Buys and three Holds, KO stock scores a Strong Buy consensus rating. The average Coca-Cola stock price target of $67.64 implies 5.84% upside potential. It is worth noting that KO is a Dividend King that has hiked its dividends for 62 consecutive years. At a quarterly dividend per share of $0.48, KO stock offers a dividend yield of about 3%.
Alphabet (NASDAQ:GOOGL)
Alphabet shares have advanced more than 26% year-to-date. The parent company of search engine giant Google reported upbeat Q1 2024 results, crushing analysts’ expectations with a 15% revenue growth to $80.54 billion. Moreover, Q1 EPS increased 61.5% to $1.89, driven by solid revenues and the company’s efficiency measures.
Alphabet improved its Q1 operating margin even as it continues to significantly invest in AI to boost its prospects. The company’s performance reflected strength in the core Google advertising business. Also, Google Cloud witnessed a 28% rise in its revenue.
Moreover, investors cheered the announcement of a $70 billion stock buyback plan and Alphabet’s first-ever quarterly dividend of $0.20 per share.
What is the Target Price of GOOGL Stock?
On June 6, Jefferies analyst Brent Thill reaffirmed a Buy rating on Alphabet stock with a price target of $200, following the appointment of Anat Ashkenazi as the company’s new CFO. The analyst believes that with her solid experience, the new CFO has the potential to enhance shareholder value.
The analyst highlighted Ashkenazi’s commendable tenure at Eli Lilly (NYSE:LLY), where the pharma giant’s stock generated a 300% return in the duration in which she served as CFO, significantly outperforming the S&P 500 (SPX). Thill is positive that Ashkenazi will help in bringing the “much needed disclosures to GOOGL such as revenue, margin, & EPS guidance,” which could drive the stock’s valuation higher.
Finally, Thill expects Alphabet to benefit from Ashkenazi’s track record of leading successful acquisitions and the ability to balance significant investments in AI ventures while sustaining healthy margins.
Alphabet stock has a Strong Buy consensus rating based on 32 Buys versus five Holds. The average GOOGL stock price target of $197.53 implies 13.2% upside potential.
Tesla (NASDAQ:TSLA)
Shares of electric vehicle (EV) maker Tesla have declined more than 28% so far this year and underperformed the broader market. Concerns about subdued EV demand due to tough macro challenges, lack of innovation, and growing competition have weighed on investor sentiment.
Tesla’s Q1 results reflected the impact of the company’s aggressive price cuts to spur volumes and fight competition. Revenue declined 9% to $21.3 billion, while adjusted EPS plunged 47% to $0.45.
While critics are worried about weak demand, intense competition, and CEO Elon Musk’s focus on ventures other than Tesla, bullish analysts remain optimistic about the road ahead. Tesla supporters expect the company’s prospects to improve with the planned launch of its affordable EVs and greater adoption of its FSD (full self-driving) technology.
Is Tesla a Buy, Hold, or Sell?
Recently, Wells Fargo analyst Colin Langan reiterated a Sell rating on Tesla stock with a price target of $120, citing multiple headwinds, including a notable fall in vehicle volumes. The analyst also noted that the company’s FSD technology continues to witness challenges, with limited adoption by customers.
Langan thinks that the FSD technology could face potential complications in China due to regulatory restrictions on data sharing. The analyst also highlighted operational issues resulting from internal restructuring and the company’s decision to make huge investments in AI.
Overall, Tesla’s Hold consensus rating is based on nine Buys, 14 Holds, and nine Sells. The average TSLA stock price target of $174.60 indicates a possible downside of 1.6% from the current levels.
Conclusion
Wall Street is highly bullish on Alphabet and Coca-Cola, but sidelined on Tesla. Alphabet stock has outperformed KO and TSLA stocks so far this year. Moreover, analysts see higher upside potential in GOOGL stock from the current levels compared to the other two mega-cap stocks.
Remarkably, as per TipRanks Smart Score System, GOOGL stock earned a “Perfect 10” score, which implies that it has the ability to deliver market-beating returns over the long term.
