KO Leaps are attractively priced.
I bought some leaps at $55 for Jan 2026 and paid $857
I will sell a covered call if / when the stock goes up in next few weeks.
My target for Jan 2026 for KO is $65.
I worry about brands that have high price differentials between their product and the equivalent generic product. There are two things to worry about:
- Consumers switching on the margin, this isn’t such a huge worry because most consumers don’t switch, but it does stunt growth because there are always some who do switch which is a headwind against new consumers of your product.
- The TALK about brands name versus generic. There’s been some talk about this recently, and if that talk suddenly increases, people out there will value your company lower than otherwise.
And there really are very significant price differentials today. And nobody should fool themselves, the generic products are VERY good, a lot better than they were even 10 years ago. For example, a 2 liter bottle of Coca Cola Zero Sugar at my local WalMart is $2.68 (discounted to $2.12 this week). An equivalent Sams Club Cola Zero Sugar is $1.00 and to me they taste about the same, both equally delightful and equally satisfying. In this case, the brand name is more than 2X the generic, I call 2X the “tipping point”, where people who casually shop while walking the aisle might decide to choose the less expensive option. Obviously a die-hard Coke fan would never do that, but a casual Cola beverage buyer might, and often will do so.
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The generic Cola argument has been there for 100+ years.
Is your argument that it is now much cheaper now so consumers will take notice ?
10 cents more is the tipping point for me. I been drinking generic diet coke for 30 years.
intercst
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The breakdown in consumer staples are not done. $PEP forward PE is 16 now. Of course $KO is executing better than $PEP.
I would wait for the consumer staples shows some stabilization before initiating position.
$STZ today declined sharply 17.1%, blame it on weight loss drugs. I am seeing this theme on $PEP, there sales of salty snacks are suffering sss decline in recent quarters. Why this matters is, in otherwise strong healthy consumer spending environment, this stands out.
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More or less, yes. The price differential was never more than 2X over all the decades that I can recall. But that isn’t the only part of the discussion, another main thing is that now [some of] the generics taste nearly as good, so once enough people get a taste, they may decide to switch over permanently.