Coca-Cola Stock Upgraded After Lowest Close In Over a Year

Options traders have been selling to open KO calls

May 17, 2018 at 8:54 AM
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The Coca-Cola Co (NYSE:KO) has underperformed in 2018, down 9.4% year-to-date. The shares took a sharp tumble back in early February due to broad-market headwinds, and they've failed to recover. In fact, KO stock hasn't traded above its 20-day moving average since April 24, and yesterday it recorded its lowest settlement since February 2017, closing at $41.55. Analysts at Barclays apparently aren't concerned, raising their outlook on the blue chip in a note this morning.

The brokerage firm upgraded the equity to "overweight" from "equal weight," and raised its price target to $48 from $45 -- pricing in upside of 15.5%. Barclays has been impressed with the transformation in Coca-Cola's business, saying it expects the changes to result in accelerated sales and earnings.

On the surface it would appear most analysts are still bearish on KO, with nine of the 15 in coverage handing out tepid "hold' recommendations. But the average 12-month price target stands up at $49.75, which represents a 19.7% premium to current levels. And just a month ago, Goldman Sachs weighed in by picking the beverage giant over its rival PepsiCo (PEP).

Looking at the options data, a number of traders are betting against the stock. The June 47 call is home to peak open interest, where nearly 43,000 contracts reside. However, data from the major options exchanges hints at mostly sell-to-open activity here, This would suggest speculators expect the $47 level to act as a ceiling in the coming weeks.

 

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