Purchase, New York-based PepsiCo, Inc. (PEP) manufactures, markets, distributes, and sells various beverages and convenient foods. Valued at $210.5 billion by market cap, the company offers a variety of grain-based snacks, carbonated and non-carbonated beverages, and foods under the brands Lay's, Doritos, Fritos, Tostitos, Cheetos, Life, Pearl Milling Company, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and more.
Companies worth $200 billion or more are generally described as “mega-cap stocks,” and PEP definitely fits that description, with its market cap exceeding this threshold, reflecting its substantial size, influence, and dominance in the non-alcoholic beverages industry. PepsiCo's strength lies in its diverse brand portfolio, which maintains significant market share across various categories. The company's strong brand image and customer loyalty drive consistent revenue streams, particularly in convenience foods. PepsiCo's integrated business model allows for cost-effective operations and a strong competitive position, enabling the company to drive productivity savings and manage commodity costs effectively.
Despite its notable strength, PEP slipped 16.3% from its 52-week high of $183.41, achieved on May 16, 2024. Over the past three months, PEP stock declined 5.7%, underperforming the Dow Jones Industrials Average’s ($DOWI) 2% losses during the same time frame.
In the longer term, shares of PEP rose marginally on a YTD basis but dipped 8.1% over the past 52 weeks, underperforming DOWI’s YTD gains of 3.1% and 12.6% returns over the last year.
To confirm the bearish trend, PEP has been trading below its 200-day moving average since October 2024. However, the stock is trading above its 50-day moving average since late February.
PepsiCo's underperformance is due to the upcoming closure of a Frito-Lay facility in New York for cost-cutting, concerns about potential cuts to food assistance programs, and falling profit forecasts. The company has been impacted by slowing growth, increased health consciousness among consumers and regulators, and a decrease in snacking habits. Sales have been declining, particularly in the potato chip category, as consumers are more cautious due to higher food prices and interest rates.
On Feb. 4, PEP shares closed down more than 4% after reporting its Q4 results. Its adjusted EPS of $1.96 exceeded Wall Street expectations of $1.95. The company’s revenue was $27.8 billion, missing Wall Street forecasts of $27.9 billion.
In the competitive arena of non-alcoholic beverages, The Coca-Cola Company (KO) has taken the lead over PEP, showing resilience with a 14.4% gain on a YTD basis and a 17.9% uptick over the past 52 weeks.
Wall Street analysts are moderately bullish on PEP’s prospects. The stock has a consensus “Moderate Buy” rating from the 20 analysts covering it, and the mean price target of $162.53 suggests a potential upside of 5.9% from current price levels.
