Why Coca-Cola Stock Is a Top Pick for Traders Today

Key Points

• A new catalyst is brewing for Coca-Cola stock, as an unusual number of calls today are driving the purchase of call options ahead of a potentially significant move.
• Other market participants and their moves suggest this could be a reality for Coca-Cola.
• Institutions and Wall Street analysts are prepared to ride this move higher in the stock.

Something strange is happening in the stock market today, as most returns seem to come from mere price-to-earnings (P/E) multiple expansion rather than actual earnings per share (EPS) growth. This is an occurrence that happens in every cycle.

However, it typically means bad news for those trading in the top holdings of the S&P 500 index, which are the most overhyped names in today’s investment societies.

On the other hand, investors can imagine that the top money managers (who focus on fundamentals) would mostly be looking at names that offer the exact opposite, some P/E expansion, though backed by real EPS growth in today’s uncertain economic environment.

This is exactly why some option traders decided to jump into one particular stock in the consumer staples sector.

Shares of Coca-Cola Co. NYSE: KO have traded in a very tight channel for the past two quarters. While this stock is not known for making big moves, an unusual level of call option buying suggests that some professional traders expect the uncommon out of Coca-Cola stock in the coming months.

As it turns out, a recent event drove these traders to justify such a move.

Healthy Outlooks for Coca-Cola Stock

Far from being speculative, options traders may have noticed a significant discrepancy in how Coca-Cola stock is priced today. Considering it only trades at a forward P/E of 22.1x today, this valuation represents the lower end of the range printed since the COVID-19 pandemic months.

However, underlying EPS growth at Coca-Cola tells investors a completely different story, with a recent beat of 87 cents compared to what Wall Street analysts were expecting, which was closer to 83 cents. While not the biggest beat, any beat for Coca-Cola is a big deal considering how deeply analysts know this business, and how little volatility its financials offer.

Even with EPS exceeding expectations, the stock still delivered a quarterly performance decline of 5.3%. Seeing that most of the market is now headed higher on a weak foundation, this is where the options traders decided to make a big contrarian bet for themselves.

Buying up to 78,623 call options, traders broke above the typical trading volume for Coca-Cola by a hefty 32%. Again, knowing that the stock isn’t one to typically make big moves, there must be an underlying catalyst (perhaps a rotation) brewing up in the market to deliver this uncommon event for Coca-Cola.

Moreover, it isn’t only these traders who were willing to admit their optimism for Coca-Cola stock; over the past month, up to 4.2% of the company’s short interest also declined, indicating potential bearish capitulation, as even the bearish traders in the market understand the odds are stacked against them today.

Wall Street Joins the Coca-Cola Bullish View

As far as the trading scene goes, now investors see a clear sign of optimism coming from the options buyers and short sellers closing some positions as if expecting some big move to the upside coming soon. Now comes the time to solve the other half of the equation, and that is figuring out how Wall Street feels about Coca-Cola stock today.

The beginning of this gauge is in seeing where Wall Street analysts have the stock valued currently. With a recent boost to $84 per share as a fair value, UBS Group analyst Peter Grom is one of the latest analysts to bring Coca-Cola’s Buy rating into an expected 23.5% upside potential from where it trades today.

This double-digit upside implication could very well be the uncommon event that these options traders are waiting for, considering such a significant move is not an easy achievement for a name like Coca-Cola. However, the implication of the company making a new 52-week high price is also one to consider, as that typically triggers new institutional buying.

As these fundamentalist long-only fund managers see the benefits of Coca-Cola’s growing EPS versus the rest of the market, which is driven by P/E expansion, investors shouldn’t be surprised to see managers like the New York State Teachers' Retirement System build up a stake worth $217.5 million as of late July 2025.

Again, that new buying decision may have only been driven by the EPS-to-valuation discrepancy, but if Coca-Cola is really to deliver on the expectations set by this analyst, then a new 52-week high price could justify a lot more breakout buying from these fund managers, accelerating the stock’s path higher and delivering returns to these options traders.