Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Get The Real Thing: 3 Ways To Invest In Coca-Cola As Stellar Earnings Lift Stock

By (Tezcan Gecgil/ )Stock MarketsAug 12, 2021 13:51
Get The Real Thing: 3 Ways To Invest In Coca-Cola As Stellar Earnings Lift Stock
By (Tezcan Gecgil/ )   |  Aug 12, 2021 13:51
Saved. See Saved Items.
This article has already been saved in your Saved Items
  • As a dividend king, KO stock is widely held by passive-income seekers
  • Recent Q2 earnings were robust and Coca-Cola Classic remains the best-selling caffeinated soft drink globally
  • We expect the recent increase in KO stock price to continue and the shares to reach $60

Since the beginning of the year, investors have put their seal of approval on Coca-Cola (NYSE:KO) stock. In late January, KO was trading around $48. Currently, the shares are shy of $57 and not too far off the recent 52-week high of $57.56.

Coca-Cola Weekly Chart.
Coca-Cola Weekly Chart.

The current share price of the beverage giant also supports a dividend yield of almost 3%. With just about six decades of consecutive payout increases, Coke is part of an elite group of stocks dubbed dividend kings. As such they always get the attention of passive-income seekers.

On a side note, several other dividend king shares fixed income investors favor include Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), Sysco (NYSE:SYY), Altria (NYSE:MO) and Hormel Foods (NYSE:HRL).

Despite the recent run-up, KO has underperformed the S&P 500 over the past year. Coca-Cola shares returned 17% in the last 12 months, whereas the S&P 500, which saw a record high on Aug. 12, is up by 33%.

Many investors now wonder what they can expect from KO stock during the rest of the year. We believe the bullish momentum will continue and the shares will aim for $60.13, the all-time high hit in February 2020, before the pandemic.

Therefore, today we discuss how investors might consider incorporating the shares into their portfolios.

How Recent Earnings Came In

Coca-Cola Classic is the best-selling caffeinated soft drink worldwide.

Recent metrics suggest:

“Coca-Cola retains [the] title of worlds most valuable and strongest soft drink brand, brand value US$33.2 billion and elite AAA+ brand strength rating.”

Yet, in recent years, Coca-Cola has struggled with decreasing soda sales. But management has started diversifying its offerings with teas, coffees, juices, water, and sports drinks.

In late July, Coca-Cola announced robust Q2 metrics. Revenue was $10.1 billion, an increase of 42% year-over-year. Operating income was also up 52%.

Non-GAAP EPS went up by 61% YoY and reached 68 cents. Investors were also pleased to see that cash flow from operations was $5.5 billion so far in the year. A year ago, it had been $2.7 billion. The company announced significant sales in core geographies, including North America, China, and Brazil.

On the results, CEO James Quincey said:

“Despite the asynchronous nature of the recovery, we are raising our full-year guidance. We are executing against our growth plans and our system is aligned.”

For full-year 2021, management now expects to generate 12%-14% in organic revenue growth. The previous guidance had been 9%.

Nonetheless, the company still anticipates pandemic-related issues and potential risks over the rest of the year. For example, the recent increase in COVID-19 cases due to the Delta variant has been pressuring sales in India as well as in several other countries.

What To Expect From KO Stock Price

Among 26 analysts polled via, KO stock is projected to outperform. The 12-month median price target of $61.92 would represent a return of more than 8% from the current level.

KO Consensus Estimates.
KO Consensus Estimates.


According to the technical charts, short-term oscillators are currently approaching overbought levels.

KO Technical Indicators
KO Technical Indicators


However, they can stay like that for quite a long time. More than likely, KO stock will trade sideways in the coming weeks—especially between $55 and $57—until it builds a base around those levels.

When we look at longer term charts and trend lines, we expect the bullish move to continue, possibly to the $60 level, the record high hit about a year and half ago.

As part of the short-term sentiment analysis, it would be important to look at the implied volatility levels for Coca-Cola options, which typically show traders the market's opinion of potential moves in a security. However, it does not forecast the direction of the move.

KOs current implied volatility is 12.6, which is lower than the 20-day moving average of 14.1. In other words, implied volatility is trending lower. Although the current IV level could change, for now it would be safe to assume that the market does not expect wild swings in Coca-Cola shares.

3 Possible Trades

With that information, here are three possible trades for investors who expect the positive momentum in KO stock to continue in the coming weeks.

1. Buy KO Stock At Current Levels

Investors who are not concerned with daily moves in price could consider investing in KO stock now.

On Aug. 11, KO stock closed at $56.73.

Buy-and-hold investors should expect to keep this long position for several months while the stock potentially makes an attempt at the record high of $60.13.

With a long-term focus, most retail investors can patiently get through the short-term noise of the markets while they hold robust shares that can weather potential adverse developments.

Assuming an investor enters this trade at the current price and exits around $60, the return would be slightly more than 5%. Meanwhile, they would be entitled to the dividend payouts.

Investors might also consider placing a stop-loss at about 3-5% below their entry point.

2. Sell A Cash-Secured Put Option On KO Stock

Our second trade involves a cash-secured put strategy. We have recently covered this option in numerous articles. Here is one example.

KO stock traders could now sell a Nov. 19, 55-strike put option, which is currently being offered at $1.35.

Assuming traders would enter this put-selling strategy at the current price, the upside is keeping this premium of $135 as long as KO stock closes above $55, when the option expires. A total of $135 would be the maximum return for this trade.

The downside is if Coca-Cola stock trades below $55.00 ahead of expiration. Should that occur, traders could be assigned 100 shares for each sold put at a cost of $55.00 per share.

At expiry, this trade would break even at a stock price of $53.65 (i.e., $55-$1.35).

3. Buy An ETF That Has Coca-Cola As A Top Holding

Many readers of this column would be familiar with the fact that we regularly cover exchange-traded funds (ETFs) that could be suitable for buy-and-hold investors. Thus, readers who do not want to commit capital to KO stock, but would still like to have sizeable exposure to the shares could consider buying a fund that holds the company as a leading name.

Examples of such ETFs include:

  • iShares Evolved U.S. Consumer Staples ETF (NYSE:IECS): the fund is up 16.2% YTD, and KO stock’s weighting is 11.7% in the ETF;
  • Consumer Staples Select Sector SPDR® Fund (NYSE:XLP): the fund is up 13.4% YTD, and KO stock’s weighting is 10.1% in the ETF;
  • Vanguard Consumer Staples Index Fund ETF Shares (NYSE:VDC): the fund is up 15.3% YTD, and KO stock’s weighting is 8.8% in the ETF.

Bottom Line

Coca-Cola is an important holding for many dividend investors. The company has withstood numerous market challenges as well as recessions over the past six decades while raising KO stock’s dividends every year. As we expect the shares to see a new record high in the coming months, we believe the company deserves further research.

Get The Real Thing: 3 Ways To Invest In Coca-Cola As Stellar Earnings Lift Stock

Related Articles

Get The Real Thing: 3 Ways To Invest In Coca-Cola As Stellar Earnings Lift Stock

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email