Coca-Cola Stock Gets a High-Profile Upgrade

Options traders have been bearish on KO in recent weeks

Managing Editor
Apr 17, 2018 at 9:41 AM
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Shares of The Coca-Cola Co (NYSE:KO) are higher in early trading, after receiving an upgrade to "neutral" from "sell" at Goldman Sachs, saying it expects KO to outperform rival PepsiCo (PEP) -- which was downgraded to "sell." And while the brokerage firm also cut its price target by $1 to $46, Coca-Cola stock is up 0.5% to trade at $44.90 at last check.

Looking closer at the charts, the Dow stock sold off sharply after hitting a record high of $48.61 on Jan. 26. And while the shares are now trading back above the key $44.60 region -- which marks a 38.2% Fibonacci retracement of its early February correction -- today's positive price action has KO facing off against its 80-day moving average, which helped usher the equity higher throughout most of 2017.

Analyst sentiment aligns with the stock's underwhelming performance, too, with nine out of the 15 covering brokerage firms sporting tepid "hold" recommendations. Plus, the security's 12-month price target sits just above at $49.99 -- an 11% premium to current levels.

Skepticism is seen in the options pits, as well. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows Coca-Cola stock with a 10-day put/call volume ratio of 1.04, ranking in the 84th annual percentile. This indicates puts have been bought to open over calls at a faster-than-usual clip during the past two weeks.

Regardless of whether it's puts or calls, though, the beverage name has consistently disappointed premium buyers over the past year. KO's Schaeffer's Volatility Scorecard (SVS) arrives at a low reading of 9 out of 100, meaning the options market has tended to overestimate the stock's ability to make big moves in the last 12 months.

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