Why Coca-Cola stock could have a rough year in 2025

Beverage company Coca cola (K.O -0.46%) has performed quite well in recent years. Its strong brands have made the business more resilient than other companies dealing with inflation and rising costs; it simply managed to pass on higher costs to its consumers. And for the most part, demand has remained resilient.

But it might not be the same story next year. Here’s why Coca-Cola stock could be in trouble in 2025 and whether it’s still a good investment to keep in your portfolio today.

The company’s growth rate could decline further

Inflation generally hasn’t been a huge problem for a big brand like Coca-Cola. Its popular products are staples in many households, and if the prices go up a bit, they’re not likely to break the budget.

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

Coca-Cola reported its latest earnings figures last week, and net income for the period ended Sept. 27 fell 1 percent year-on-year. What’s worrisome is that price increases are supporting its top line. The price mix component of revenue was up 10%, but overall unit volumes fell 1%, which could be a sign that demand may not be so resilient anymore. Divestments, structural changes and currency exchange were other factors that also affected beverage companylast quarter’s growth rate.

This is different from a previous period when Coca-Cola’s growth rate was 3%, and while price increases also played a role, caseload increased by 2%.

Starting next year, with inflation under control and Coca-Cola possibly having less justification for further price increases, it may not be able to rely on a high price mix component to give it a boost top line. And without that, the company’s sales are likely to fall, especially as they come up against strong comparable numbers.

Coca-Cola’s high rating increases the chances of a correction

Another reason investors may be wary of holding Coca-Cola stock right now is that it’s trading at about 28 times trailing earnings. That’s a big multiple for a business that’s growing in the single digits and doing so largely due to price increases. By comparison, the average stock on S&P 500 trade at a price-earnings multiple a little over 25.

The risk for investors is that if the company’s growth rate continues to decline, there will be less reason to pay such a premium for the stock, which could lead to a selloff next year. And if there is a downturn in the economy, that could lead to a broader decline in the market as a whole, and stocks at high valuations may come under even more pressure. In any case, Coca-Cola could make 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. Finally, if you’re investing in stocks, you’re probably doing it primarily for long-term stability, plus dividend income.

Coca-Cola can still make a great dividend stock to own for investors who want recurring income to flow into their portfolios. Stock is a The King of Dividendsafter raising its payments for 62 consecutive years. And in the long run, it can be a sure pillar to build your portfolio.