We view KO’s valuation of ~21x CY’26E P/E as compelling given a stronger topline growth and higher margin profile vs. mega-cap peers. We value KO based on ~26.5x CY’26E P/E, which is above the company's historical average given the expectation for strong topline growth and profitability. Given this multiple, we derive our $85 target price.

The key risks to our investment thesis and the shares reaching the target price on KO are: (i) global consumer weakness; (ii) an unfavorable shift in foreign exchange; (iii) challenges in working with its bottling partners; (iv) an unfavorable outcome from the IRS tax case; and (v) a resurgence of COVID that would negatively impact KO’s on-premise business.

If the impact on the company from any of these factors proves to be more negative than we anticipate, the stock will likely have difficulty achieving our financial and price targets. Likewise, if any of these factors proves to have less of an effect than we anticipate, the stock could materially outperform our target.