Why Coca-Cola Stock Could Be In for a Tough Year in 2025

Beverage company Coca-Cola (NYSE: KO) has performed fairly well in recent years. Its strong brands have made the business more resilient than other companies dealing with inflation and rising costs; it has simply been able to pass on higher costs to its consumers. And for the most part, demand has remained resilient.

But that may not be the same story next year. Here's why Coca-Cola stock may run into some trouble in 2025, and whether it's still a good investment to hold in your portfolio today.

The company's growth rate could decline further

Inflation generally hasn't been a huge problem for a big brand such as Coca-Cola. Its popular products are staples in many households, and if prices rise a bit, that's not likely to break the budget.

The problem is that over time, those price increases can start to add up, and consumers can reach breaking points, at which point they may be more inclined to try substitute products. And consumers may finally be pushing back.

Coca-Cola reported its latest earnings numbers last week, and its net revenue for the period ending Sept. 27 was down 1% year over year. What's concerning is that's with price increases propping up its top line. The price-mix component of revenue represented a 10% increase, but global unit case volumes were down by 1%, in what could be a sign that demand may not be so resilient anymore. Divestitures, structural changes, and foreign exchange were other factors that also weighed down the beverage company's growth rate last quarter.

This is different from a period earlier, when Coca-Cola's growth rate was 3%, and while price increases also played a big role in that, case volume rose by 2%.

Heading into next year, with inflation coming under control and Coca-Cola having possibly less of a justification for further price increases, it might not be able to rely on a high price-mix component giving its top line a boost. And without that, it's possible the company's sales may end up declining, especially as it goes up against strong comparable numbers.

Coca-Cola's high valuation increases the odds of a correction

Another reason investors may be wary of owning Coca-Cola stock right now is that it trades at around 28 times trailing earnings. That is a high multiple for a business that is growing in the single digits, and doing so largely due to price hikes. By comparison, the average stock on the S&P 500 trades at a price-to-earnings multiple of a little over 25.

The risk for investors is that if the company's growth rate continues to slow down, there will be less of a reason to pay such a premium for the stock, which could lead to a sell-off next year. And if there's a downturn in the economy, that could result in a broader market decline overall, and stocks at high-priced valuations may come under even more pressure. In either event, Coca-Cola could make for a vulnerable holding in 2025.

Should you buy Coca-Cola stock?

Next year may not be a great one for Coca-Cola, but long-term investors may not necessarily care anyway. Ultimately, if you're investing in the stock, you're probably doing it primarily for its stability in the long run, plus its dividend income.

Coca-Cola can still make for an excellent dividend stock to own for investors who want some recurring income flowing through to their portfolios. The stock is a Dividend King, having raised its payouts for 62 consecutive years. And for the long haul, it can be a safe pillar to build your portfolio around.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.