PepsiCo (PEP) Stock Forecast for 2024, 2025, 2026. Sell or Buy?

Building Benjamins, a contributor with a notable presence since 2022, has penned a compelling analytical financial article, maintaining a bullish outlook on PEP stock. Despite their relatively recent entrance into the field, their publication frequency of 113 articles and a growing subscriber base of 1,837 affirm their rising popularity. Their consistent output of insightful content has earned them mid-range credibility within the financial community. This article encapsulates their informed perspective on PEP, providing readers with a well-supported thesis that reflects their steadily increasing influence and trustworthiness in financial analysis.

Key Theses

• PepsiCo is a diversified blue-chip company with over 500 brands operating globally, including 23 brands each generating over $1 billion in revenue.
• PepsiCo trades at a discount at 21.0x earnings compared to its 5-year average of 25.0x earnings.
• PepsiCo offers a 3.1% dividend yield and has 52 consecutive years of dividend increases.
• PepsiCo is investing in efficiency, acquiring localized brands, and improving supply chain resilience.

Factors Affecting PEP Company Stock Price

PepsiCo's extensive brand portfolio and global presence reduce market cyclicality and create stable revenue streams, which are crucial for long-term growth. This diversified positioning enhances investor confidence in the company's ability to sustain profits and dividends.

Trading at 21.0x earnings, below its 5-year historical average of 25.0x, suggests PepsiCo may be undervalued. This makes it an attractive buying opportunity for investors looking for strong dividend payers at a discount.

PepsiCo's 3.1% dividend yield with over five decades of increases appeals to income-focused investors. This commitment to dividends can drive stock price as it signals financial health and shareholder value.

Recent investments in efficiency and supply chain resilience are likely to boost operational efficiency, reducing costs and potentially increasing margins. However, these impacts may take time to fully materialize, affecting near-term stock price moderately.

Current economic pressure and consumer financial strain pose a risk to volume growth, particularly reflected in strained Quaker and Frito-Lay segments. Persistent inflation around 3% could force consumers to cut back or switch to lower-cost alternatives, impacting revenue.

Strong international growth, especially outside the US where PepsiCo’s margins are higher, suggests robust near-term revenue drives. Strategic capital expenditure in high-growth areas like India and Latin America is poised to support this expansion.

Current lawsuits and product recalls pose financial and reputational risks. Although their immediate economic impact has been limited, significant legal setbacks could negatively affect investor sentiment and the company's stock price.

Commentary

PepsiCo's strategic moves are creating a buzz in the market. Trading at a 21.0x earnings multiple, below its 5-year average of 25.0x, suggests it's undervalued and a potentially good buy for investors seeking stability and income. Coupled with a solid 3.1% dividend yield and 52 years of consecutive increases, PepsiCo’s dividend strategy is particularly appealing. It signifies not just robust financial health but also management's commitment to delivering shareholder value, enhancing the stock’s allure.

Global diversification and strong branding act as anchors against market volatility, while recent investments in supply chain efficiency and international expansion into high-growth markets like India and Latin America underscore long-term growth potential. These factors average to a moderate influence strength of about 6.57, indicating a positive, stable trend in the next 15 days and the coming month. However, economic pressures and legal risks could pose challenges. Yet, the blend of a strong brand portfolio, apparent undervaluation, and historical dividend growth translates to a promising outlook for PepsiCo's stock.

In his latest analytical financial article, Mike Zaccardi, CFA, CMT, maintains a bullish stance on PEP stock. Zaccardi's insights are followed by many, reflected in his impressive body of work, having authored 1,408 publications since 2022. With 6,608 subscribers, his analyses garner considerable attention and respect within the financial community. Given his extensive contribution in a relatively short period and his high credibility, Zaccardi's perspectives are notably influential. Investors seeking informed and credible viewpoints will find value in Zaccardi’s latest bullish take on PEP stock.

Key Theses

• PepsiCo (PEP) outperformed EPS expectations but missed revenue targets in its latest quarterly report.
• Challenges persist in the snack and soft drink markets, but international markets show strong performance.
• PepsiCo rewards shareholders with dividends and buybacks.
• Analysts predict continuous growth in earnings and dividend yield.
• Valuation appears attractive despite mixed financial results and tepid technical performance.

Key Factors Influencing PepsiCo's Stock Price

PepsiCo beat EPS expectations but missed revenue targets, which indicates strong cost management but declining sales, potentially weighing on future stock performance.

Consumers' pushback and deflationary trends in goods are impacting sales, notably causing a 3% decline in Frito-Lay volumes, which could pressure share prices due to margin reductions being required to attract cost-conscious consumers.

Shareholder returns through dividends and buybacks ($1.0 billion in repurchases and $7.2 billion in dividends) create a stable income stream, supporting stock price stability and investor confidence.

A weaker US Dollar Index could provide a significant FX tailwind in Q3, potentially boosting earnings and thereby favorably impacting the stock price.

The Consumer Staples sector's strong performance compared to the overall S&P 500 indicates a favorable macro environment for defensive stocks like PepsiCo, likely supporting PEP’s stock price.

BofA analysts forecast a 6% rise in EPS this year, with continued mid-to-high single-digit growth, providing a positive outlook which should buoy investor sentiment and support the stock price.

Using a reduced earnings multiple of 22, the intrinsic value target for PEP is now $187, which still indicates undervaluation and thus potential for stock price appreciation.

The stock's current trading range and lackluster momentum do not indicate near-term significant price movements, requiring a break above the $180-$183 level for a potential uptrend.

Commentary

PepsiCo's recent quarterly performance offers a mixed bag but leans positive, especially for investors. While revenues fell short, the company managed to beat EPS expectations through strong cost management. The snack and soft drink markets are challenging, with a noticeable drop in Frito-Lay volumes due to deflationary trends and budget-conscious consumers. However, international sales mitigated some of this domestic softness, offering a positive outlook for future earnings.

On the flip side, the company remains committed to rewarding shareholders through dividends and buybacks, providing stable returns and bolstering investor confidence. With a predicted 6% rise in EPS and a potential FX tailwind from a weaker dollar, the stock’s underlying value appears attractive. What's more, using a reduced earnings multiple, the intrinsic value target for PepsiCo stands at $187, indicating that the stock is currently undervalued. In the next 15 days and the coming month, these factors collectively show moderate strength in positively influencing PepsiCo's stock trend.