Here’s Why Coca-Cola (KO) Stock Could Continue to Deliver Steady Gains to Investors

Key Takeaways:

• Coca-Cola stock could conservatively be worth over $87/share by the end of 2027.
• That’s a potential 24% upside from today’s price of approximately $70 per share.
• KO stock is poised to benefit from steady revenue growth and margin expansion as the company executes its all-weather strategy.
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The Coca-Cola Company (KO) is the world’s largest beverage company, operating a portfolio of over 200 brands across various categories, including sparkling soft drinks, water, sports drinks, coffee, tea, and juice.

Coca-Cola leverages its global franchise system to distribute products in more than 200 countries and territories, combining global scale with local execution.

We ran a comprehensive valuation model on Coca-Cola stock to assess its current value and potential upside for investors.

Using reasonable assumptions based on analyst estimates and recent performance, the model suggests that KO stock could be worth over $87 per share by the end of 2027. That would imply 24% upside from the current Coca-Cola stock price of $70.

The compelling aspect of this forecast is that it assumes Coca-Cola maintains its current valuation multiple while delivering steady growth through its proven strategy.

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What Coca-Cola Does

Coca-Cola operates the world’s most valuable beverage portfolio, featuring 30 billion-dollar brands, including Coca-Cola, Sprite, Fanta, and newer additions such as Fairlife and Topo Chico.

The company’s franchise model partners with local bottlers, who produce and distribute beverages in their respective territories, allowing Coca-Cola to leverage its global scale while maintaining local relevance.

The business has demonstrated resilience through various economic cycles, with consistent cash flow generation and dividend payments spanning over 60 years.

Here’s why KO stock could deliver solid returns over the next 2.5 years through disciplined execution of its growth strategy.

Our Valuation Assumptions

TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.

In our valuation, we’ll simply use analysts’ consensus estimates and break down what analysts think the stock is worth today.

Here’s what we used for KO stock:

1. Revenue Growth: 4.5% CAGR

Coca-Cola has shown steady growth with revenue increasing 2.4% over the past year and 6.7% annually over the last three years.

Its guidance for 5-6% organic revenue growth aligns with long-term expectations of mid-single-digit expansion driven by volume growth and pricing actions.

2. Operating Margins: 31.6%

Coca-Cola’s EBIT margins have expanded to 30.0% over the last twelve months, reflecting a focus on productivity and revenue growth management.

As the business continues to optimize its portfolio and leverage scale, analysts project operating margins will average 31.6% through 2028.

3. Exit P/E Multiple: 23x

Coca-Cola currently trades at reasonable valuation multiples given its defensive characteristics and consistent cash generation.

We used a 23x P/E multiple, which reflects the beverage giant’s quality and its status as a dividend aristocrat, while remaining conservative.

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What the Model Says for KO Stock

With these inputs, the valuation model estimates that KO stock could reach approximately $87/share by the end of 2027.

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That represents a potential gain of 24% from today’s price of around $70. The model shows this would translate into an annualized return of approximately 9% over the next 2.5 years. If we include its annual dividend, cumulative annual returns would be closer to 12%.

This forecast is based on Coca-Cola’s ability to execute its all-weather strategy, which focuses on consumer-centric innovation, marketing excellence, and operational efficiency across its global system.

The model forecasts the business’s future earnings-per-share based on revenue growth and margin expansion, then applies a P/E multiple to estimate the future stock price.

This helps investors understand what financial performance is required to generate strong returns and how much upside is available if those expectations are met.

What Happens If Things Go Better or Worse?

The model enables various scenarios based on how effectively Coca-Cola executes its strategy and responds to market conditions.

Here’s the range of potential outcomes:

• Low Case: Conservative growth with some margin pressure → 7-8% annual returns
• Mid Case: Steady execution of current strategy → 8-10% annual returns
• High Case: Accelerated growth in key categories and markets → 10-12% annual returns

Even the conservative scenario offers returns that could outpace inflation and provide steady income growth through dividends, reflecting Coca-Cola’s defensive investment characteristics.

Coca-Cola’s earnings growth is likely to be driven by a combination of factors:

• Portfolio Diversification: Coca-Cola is expanding beyond traditional carbonated soft drinks into faster-growing categories, such as sports drinks, premium water, and plant-based beverages.
• Revenue Growth Management: Coca-Cola’s sophisticated approach to pricing, packaging, and channel strategy allows it to optimize revenue per occasion across different consumer segments.
• Digital Transformation: Investments in digital marketing, e-commerce capabilities, and data analytics are enhancing customer engagement and operational efficiency.
• Emerging Market Expansion: Growing middle-class populations in developing markets provide long-term volume growth opportunities.
• Operational Excellence: Productivity initiatives and supply chain optimization continue to drive margin expansion.

How the Street Sees KO Stock

In the near term, Wall Street also sees upside. Analysts have an average price target of ~$78/share, which means they see about 11% upside for KO stock:

See analysts’ growth forecasts and price target for Coca-Cola (It’s free!) >>>

Risks to Consider

Despite the bullish outlook, investors should be aware of several risks that could impact Coca-Cola’s growth trajectory:

• Health and Wellness Trends: The continued consumer shift toward healthier beverages could pressure traditional soft drink volumes, although Coca-Cola is adapting its portfolio accordingly.
• Currency Headwinds: As a global company, Coca-Cola faces ongoing foreign exchange risks that can impact reported results, particularly in emerging markets.
• Commodity Cost Inflation: Rising costs for key ingredients, such as sugar, aluminum, and PET resin, can pressure margins if not offset by pricing adjustments.
• Regulatory Environment: Potential taxes on sugary beverages and other regulatory changes could impact demand in specific markets.
• Competition: Intense competition from both traditional players and new entrants in rapidly growing beverage categories necessitates ongoing innovation and marketing investment.

TIKR Takeaway

Coca-Cola has developed a resilient business model that generates consistent cash flows, providing shareholders with steady dividend income.

If it continues executing its all-weather strategy while adapting to changing consumer preferences, we believe KO stock offers attractive risk-adjusted returns for income-focused investors.

The 24% upside potential over the next 2.5 years, combined with a current dividend yield of approximately 3%, makes Coca-Cola stock an appealing option for investors seeking steady returns in an uncertain market environment.

Is KO stock a buy over the next 24 months? Use TIKR’s Valuation Model alongside analysts’ growth forecasts and price targets to see if it is undervalued today.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!