Trump announces trade deal with EU following months of negotiations
On Tuesday, UBS analyst Peter Grom reaffirmed a Buy rating and a $175.00 price target for PepsiCo (NASDAQ:PEP) stock, representing potential upside from the current price of $149.94. Grom’s statement followed PepsiCo’s announcement that it has entered into an agreement to acquire Poppi, a prebiotic soda brand. This move is part of PepsiCo’s strategy to enhance its carbonated soft drink (CSD) portfolio with a brand that aligns with the growing consumer demand for healthier options. According to InvestingPro data, PepsiCo maintains impressive gross profit margins of 54.89%, demonstrating its operational efficiency in the beverages industry.
The acquisition of Poppi is PepsiCo’s latest step towards expanding into health-and-wellness oriented categories. This follows the recent $1.2 billion acquisition of Siete Foods, a company known for its healthier salty snacks. Shares of PepsiCo were trading up 1.6% on Tuesday, which may reflect investor optimism regarding the company’s ongoing efforts to integrate brands that appeal to health-conscious consumers. With a market capitalization of $205.68 billion, PepsiCo remains a dominant player in its sector. InvestingPro analysis reveals 12 key investment tips for PepsiCo, including its 52-year streak of consecutive dividend increases.
According to Grom, the positive reaction in PepsiCo’s share price could also be attributed to the stock’s current valuation. PepsiCo shares are trading at approximately a 20% discount compared to their large-cap multinational peers, whereas historically, they have traded at a slight premium. This valuation presents what UBS views as an attractive entry point for investors. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with an attractive dividend yield of 3.58%. Get access to PepsiCo’s comprehensive Pro Research Report, part of InvestingPro’s coverage of 1,400+ top US stocks, for detailed valuation insights.
Despite this potential, UBS anticipates that the catalysts for PepsiCo’s stock performance will be closely linked to trends in North America, particularly within the salty snacks segment. While investors acknowledge the attractiveness of the current entry point, there is a sense of caution, with many adopting a wait-and-see approach. They are looking for more concrete signs that PepsiCo’s business is stabilizing before committing further. The stock currently trades between its 52-week range of $141.51 to $183.41, with seven analysts recently revising their earnings expectations downward for the upcoming period.
In other recent news, PepsiCo has announced its acquisition of the prebiotic soda brand Poppi for $1.95 billion. This strategic move includes $300 million in expected cash tax benefits, effectively reducing the net cost to $1.65 billion. The acquisition reflects PepsiCo’s ongoing shift towards healthier beverage options, catering to the increasing demand among younger consumers in the U.S. for wellness-oriented products. Additionally, Barclays (LON:BARC) has downgraded PepsiCo’s stock rating from Overweight to Equal Weight, adjusting the price target to $156 from $168. This change is attributed to concerns about the near-term volume recovery of PepsiCo’s Frito-Lay North America division, which may take several quarters to stabilize. Despite these challenges, Barclays acknowledges the potential for sustainable growth in PepsiCo’s FLNA division and the company’s ability to achieve its lower-end sales and profit growth targets. PepsiCo’s recent acquisition of Poppi aligns with its strategy to expand its portfolio with health-focused brands, further diversifying its offerings to meet evolving consumer preferences.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.