#5 - PepsiCo (NASDAQ:PEP)
PepsiCo (NYSE: PEP) - The problem: The company it keeps
Pepsi is a leader in a category that faces significant challenges. So let’s start with the good news. Since its stock fell nearly 20% to reach a low of $97 in the spring, it has bounced back and now sits around $112. Unfortunately for investors, that may be as good as it gets. This is a sector that is in the crosshairs. From an investing perspective, when interest rates rise, investors move away from dividend-heavy stocks, which is a signature feature of food and beverage giants such as Pepsi and Coca-Cola. True to form, over the last 12 months, this sector has seen investor money flee, but Pepsi has outperformed.
Do they know something others don’t or is this the case of being the tallest of the seven dwarfs? Soda sales continue to decline as consumers seek out alternatives such as energy drinks and soda, in general, has become one of the poster children for childhood obesity, striking at a core demographic. The larger problem Pepsi may have is more fundamental. Their stock is currently trading at 20x earnings which is significantly higher than many of their competitors who are trading at 15x earnings. A spread like that signals that investors may be ready to take profits and cut Pepsi down to size.
About PepsiCo
PepsiCo, Inc engages in the manufacture, marketing, distribution, and sale of various beverages and convenient foods worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.
Read More - Current Price
- $177.34
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $185.53 (4.6% Upside)
