Pepsi Tastes Even Better
We aggressively purchased $PEP in the premarket on Thursday and in early trading in the regular session.
Pepsico’s shares rose by over +$4 yesterday follwing the EPS and Sales guidedown.
Here is a summary of Goldman Sachs’ view of the company:
While investors debate whether PEP can grow earnings next year, we take a more optimistic view and expect faster topline growth on both the top and bottom lines albeit likely below the company’s l.t. growth algo. As such, we continue to see a positive risk-reward profile on the stock, especially as we think positioning and sentiment skews overly negative. Further, we think PEP’s valuation is attractive – with the stock trading at a very sharp discount (~10x) on a forward P/E basis relative to KO on a forward P/E basis – well below it’s l.t. historical average discount of ~1x – while also trading at a ~5x discount to PG (i.e., a Staples peer) despite a similar topline growth profile (to PG).
Bottom Line – We maintain our Buy rating on PEP, as we believe it remains well positioned given its strong brand portfolio and long-term growth opportunities in both
Food & Beverages, particularly given a robust innovation pipeline, its impressive revenue growth management capabilities, its owned distribution network and superior supply chain, which ensures the right (& affordable) products are available when & where needed. Overall, we believe PEP should be able to deliver sustainable average annual +MSD organic sales growth in the next decade – despite some near-term headwinds.
Piper On PEP
Piper Sandler lowered the firm’s price target on PepsiCo to $140 from $176 and keeps an Overweight rating on the shares. Despite a Q3 EPS beat, driven by strong International momentum, PEP faces growing input cost pressure and weak U.S. trends. Further brand spend increases are coming, also weighing on margins. It has a decent innovation pipeline for 2027, focused on functional benefits, like protein and hydration, but sustainable better growth is still unproven, argues Piper.
BofA on PEP
BofA analyst Peter Galbo lowered the firm’s price target on PepsiCo to $145 from $152 and keeps a Neutral rating on the shares. The company’s Q3 beat came with better than feared Pepsi Foods NA organic sales and commentary on sequential organic revenue acceleration into Q4, but a lowered fiscal year earnings outlook signals ongoing cost challenges and raises questions around the ability to grow EPS in FY27, the analyst tells investors.
Positions: Long PEP M
