Coca-Cola (NYSE:KO) didn’t beat all of Wall Street’s expectations, but it avoided a coronavirus knock out last Wednesday when the company reported its latest quarterly earnings announcement.
KO missed Q4 revenue estimates by $20 million but beat Non-GAAP earnings estimates by $0.05 per share — coming in at $8.6 billion and $0.47 per share, respectively.
The thing is, even though KO missed on earnings, its revenue growth actually contracted less than most analysts were anticipating.
Wall Street was expecting growth to contract by 3.7% because of the coronavirus pandemic, but it only contracted by 3%.
Now, it may seem like we’re getting excited about small numbers, but most traders agree we are likely coming out of the worst part of the latest wave of rising coronavirus cases and deaths.
As we head into the spring and as more people get vaccinated, the likelihood that people are going to be venturing outside of their homes to consume Coke products goes way up.
This bullish expectation is driving the price of KO higher, and the stock has plenty of room to run.
The stock’s dramatic pullback in early January has now cleared the way for KO to climb back up to resistance first at $51.50 and then at $55 in the longer term.
Daily Chart of Coca-Cola (KO) – Chart Source: TradingView
You can see that the stock is currently on the cusp of forming an inverted head-and-shoulders bullish reversal pattern.
Once it breaks up through the down-trending resistance level that is serving as the pattern’s neckline, we expect the stock to continue climbing up to $51.50.
To take advantage of this, we recommend selling to a new put write on KO, with a strike price that’s protected under the neckline of the bullish reversal pattern once the stock breaks higher.
And we prefer a mid-March expiration because those puts have lots of premium built in, and we don’t expect the stock to move too quickly.
On the date of publication, John Jagerson & Wade Hansen did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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