Pepsi stock has fallen more than 9% so far this year.
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With vaccines slowly providing a pathway to normalcy, many people are hoping that 2021 proves to be different from 2020. That is already happening to PepsiCo, though perhaps not in the way investors wanted.
In a reversal of fortune from last year, the beverage giant is now lagging behind Coca-Cola (ticker: KO). But Barclays argues that the market is sorely underestimating the stock.
Analyst Lauren Lieberman upgraded PepsiCo (PEP) to Overweight from Equal Weight on Monday, while reiterating a target of $151 for the stock price.
The consumer-staples sector in general has been under pressure as investors look forward to an economic reopening that involves less eating at home—the Consumer Staples Select Sector SPDR (XLP) is down more than 2% this year—but Pepsi has unperformed even those peers, falling 9.3% year to date. That price movement has left Lieberman perplexed.
“If anything, we see the company as one of the few with not just clear visibility into achieving its algorithm in 2021 but also a viable path to accelerating top-line and profit delivery longer-term, providing a multi-year stock appreciation story,” Lieberman wrote in a research note.
She noted that management recently expressed confidence in its financial forecasts, and said the fact that about half of the company’s Covid-19 related costs from last year are likely to dissipate in 2021 will provide a cushion for margins.
Longer term, Lieberman said, “we are 12 to 18 months away from a conversation that begins to articulate a more significant growth and margin expansion story.”
Pepsi has been hoping to speed up its sales growth for some time. Lieberman said capacity increases in the company’s Frito-Lay North America and international snacking businesses can help, even if growth lags behind for the Pepsi brand.
Pepsi stock was up 0.7% to $135.46 in premarket trading. The shares are up 27.9% in the past 12 months. By contrast, Coke is up 35.3% in the past year and has lost a smaller 7.3% year to date.
Write to Teresa Rivas at [email protected]
