This KO Stock Forecast article was written by Milana Papadopoulou – Financial Analyst at I Know First.

Highlights

• The Coca-Cola Company is a leading global beverage company, with its products sold in over 200 countries.
• DCF Analysis suggests the stock is undervalued
• The suggested intrinsic stock value is $85.56

Humble Beginnings

KO Forecast: The Coca-Cola Company, founded in 1886, has grown from a single product sold at a soda fountain in Atlanta, Georgia, to one of the most iconic global beverage companies. Recently, Coca-Cola’s stock has shown resilience amid market fluctuations, driven by its diverse product offerings and expanding presence in health-conscious beverage categories. Despite challenges in consumer markets, the stock remains a steady performer, benefiting from strong global demand and consistent dividend payouts.

Business Description

The Coca-Cola Company (NYSE: KO) is a leading global beverage company, with its products sold in over 200 countries. The firm is best known for its flagship product, Coca-Cola, but it boasts a diverse portfolio of soft drinks. Coca-Cola generates revenue through several key channels. The largest revenue stream comes from the sale of its popular soft drinks, including Coca-Cola, Diet Coke, and Coca-Cola Zero Sugar, along with other carbonated beverages such as Sprite and Fanta.

In addition to its core soft drink offerings, Coca-Cola has expanded significantly into non-carbonated drinks, such as bottled water (Dasani, Smartwater), juices (Minute Maid, Simply), sports drinks (Powerade), teas (Gold Peak, Honest Tea), and plant-based beverages. This category has become increasingly important as consumers shift toward healthier drink options. The company also licenses and sells concentrates and syrups to bottling partners, which then manufacture, package, and distribute finished products.

Worldwide Success

The Coca-Cola Company benefits from substantial geographical diversification, with operations spanning over 200 countries. Its global presence is divided into key operating segments, including North America, Latin America, Europe, the Middle East & Africa (EMEA), and the Asia Pacific region. While North America remains Coca-Cola’s largest revenue contributor, the company derives a substantial share of its earnings from international markets.

With KO being a mature, established company, there is little potential for growth in its main markets of operation. Emerging markets, on the other hand, like Latin America, Asia and Africa provide significant potential for growth. With rising consumer demand for soft beverages and the emerging middle class, Coca-Cola faces severe competition in the regions. Despite that, gaining prominence in these markets has the potential to bring outsized returns to investors. 

Raising a Toast

However, a second wave of increasing demand for soft drinks in North America and Europe could be a potential profit boost. The “sober curious” movement encourages individuals to intentionally reduce or eliminate alcohol consumption for health, wellness, and mindfulness reasons, without necessarily identifying as sober or having alcohol dependency. This trend has gained momentum as more people explore alcohol alternatives and prioritize healthier, more balanced lifestyles.

This view on drinking is gaining significant traction, with Western Europe in the lead. It has led to increasing growth with the global market reaching $13 billion in 2024. According to analysis from IWSR, global sales volumes of non-alcoholic beverages are projected to grow at a compound annual growth rate of 7% between 2023 and 2027, ultimately comprising nearly 4% of the overall alcohol market.

KO Forecast: Discounted Cashflow Analysis

Discounted cash flow analysis suggests that KO’s stock is undervalued. The intrinsic value proposed by the model is $85.56 per share at the base case scenario. In the last 52 Weeks, the stock’s low has been $51.55 and the high $73.53. 

The profitability margins, Capex as well as the Net Working Capital are taken as percentages of Revenue for forecasting purposes. The estimates of Revenue growth over the next five years are based on analysts’ forecasts. In calculating the WACC, the risk-free rate was taken as the US 10-year Treasury Bond and the market premium as the average for beverage companies in the US. The Beta was adjusted to reflect the industry’s risk and investor sentiments based on peers, such as PepsiCo (NASDAQ: PEP), Keurig Dr Pepper (NASDAQ: KDP) and Nestle (SWX: NESN). The Discount Rate came out to 7.3% in the base case scenario. 

A five-year forecasting period was adopted as the firm is mature with an established brand and stable cash flows. The rest of the valuation was based on the Terminal Value, using a perpetuity growth model. The long-term growth rate was taken to be 3% for the base case with 4% in the upside case and 2% in the downside case.

KO Forecast: Technical Analysis

Technical Analysis also suggests a moderate buy/hold recommendation. The Double-Exponential Moving Average with 50, 100 and 200 periods are sloping upwards and suggest a general uptrend. The stock crossed the upper Bollinger Band earlier this month and retracted back, but has stayed in between the bands ever since, so it is not overbought. 

The bands have also widened recently: together with the increased Average True Range value, it signals a slight increase in the stock’s volatility. This notion can be explained by the anticipation of the next quarterly report due to be released in October. 

Overall, the trading volume has remained consistent over the last year and the firm has not had any dramatic swings. This is expected of a company as mature as Coca-Cola and is reflected in a Beta of 0.61, which suggests it is less risky than the overall market. 

Analysts’ Views

Analysts’ opinions on KO stock’s rating vary with the majority labelling it a Hold or a weak Buy. The primary reason for the lack of a bullish rating is the low projected revenue growth and high seasonality of the business leading to a disparity in quarterly earnings.

Yahoo Finance has the primary analyst consensus being that of “Hold”, with few leanings towards “Buy”. This is a change in rating as more analysts were marking Coca-Cola a “Buy” in the summer. 

CNN gives the stock a high smart score, but a third of analysts still deem the stock worthy of a ‘Hold’ rating. However, the majority of analysts are bullish on the stock with virtually none urging to sell.  

KO Forecast: Conclusion

Overall, I give Coca-Cola stock a ‘Buy’ rating. This is due to the higher valuation suggested by the DCF analysis as well as technical indicators. It is unlikely that the stock will have a significant increase, however, an investor will also not suffer from sudden drops. As Coca-Cola is a well-rounded company that is geographically diversified and has a wide portfolio of brands, it is bound to deliver stable growth and regular dividend payments. 

It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the KO stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.

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Please note-for trading decisions use the most recent forecast.