PepsiCo (NASDAQ:PEP) has long made a career out of the simple pleasure of a cold drink on a hot day, and even coronavirus couldn't slow it down all that much. The chances of people throwing over Pepsi completely are unlikely—not to mention its multiple connected restaurant brands—and such likely resilience in the field was recently called out by Barclays, who upgraded its rating on PepsiCo stock accordingly.
Banking on Future Returns for PepsiCo
Barclays bumped up its rating on PepsiCo from “equal weight” to “overweight,” and noted two key factors in its decision to do so. Barclays noted that the stock had been underperforming recently, and thus banked on a return to form. It also noted that PepsiCo had some exciting new potential afoot for improving both revenue and profit growth.
Barclays went so far as to note, according to reports, that PepsiCo not only existed as one of a handful of companies that could achieve its desired results in 2021, but also had a clear path that could drive profitability in the longer-term. That could—if all goes as planned—make PepsiCo a gainer for the next few years to come. In fact, reports further noted, this may be one of the first years that PepsiCo wouldn't have to depend on its beverage sales to drive growth.
Joining the Toast to PepsiCo
Barclays isn't alone in believing that PepsiCo can carry on a path to growth and glory. Our latest research details a long string of “buy” recommendations for PepsiCo stock, though the ratios comprising such recommendations have been shifting for the last six months.
Six months ago, the company had six “hold” ratings, eight “buy” and two “strong-buy” ratings to its credit, which is a very strong showing. However, things actually improved toward the bullish three months ago as the company lost a “hold” and kept everything else. That slipped substantially a month ago, however, and reached its most bearish level for the last six months with one “sell” rating, six “hold”, seven “buy” and two “strong buy.” The bulls recovered into the present day, and now the company stands at one “sell”, five “hold”, seven “buy” and two “strong buy.”
The price target, meanwhile, has had similar ups and downs. Six months ago, the company stood at $142.87. Three months ago, that jumped to $145.19. It slipped a bit a month ago, dropping to $144.94, but recovered going into today to its highest mark for the last six months, $146.81. Given that PepsiCo currently sells at $136.97 as of this writing, there's clear upside potential to be had here. For its part, Barclays currently has a $151 price target on the company, which is in the upper range, but not a Street high. That honor is at last report held by Citigroup and a price target of $169 per share.
Buying In on a Recovery Narrative
Immediately, several points jump out to serve as reasons why getting in on PepsiCo may be a bright idea. The first, and perhaps biggest, of these is that many of the restrictions that PepsiCo faced back in 2020 are either ending or ended outright; remember when it was actually tough to find canned beverages for a while as aluminum cans weren't being recycled as they once were? That cost Pepsi fans—and Coke (NASDAQ:COKE) fans too—several different flavors that were just discontinued.
Moreover, PepsiCo is closely connected to Yum Brands (NYSE:YUM) line of restaurants, including Taco Bell, Pizza Hut, and KFC. The restrictions on dining in being pulled in many places will likely help give some fresh life to the brands herein, and help drive recovery on that part of the market as well.
While PepsiCo may be less reliant on its beverage brands to make a profit, it's certainly not resting on those laurels, either. PepsiCo recently noted plans to release Pepsi Mango, the first new permanent flavored drink the company has released in five years. Releasing a tropical-fruit-flavored drink in time for the warmer months in North America can't be too bad a plan. Additionally, PepsiCo has also recently hooked up with basketball great LeBron James for a new partnership to launch Mtn Dew Rise Energy, a breakfast-themed drink that offers citicoline, caffeine, and zinc to help “conquer the morning.”
The combination of reviving old product lines with reduced coronavirus restrictions and new product lines emerging should work together to fuel growth at PepsiCo. Throw in the return of live events amid increasing vaccine take-up rates and that should be a recipe for gains at one of the biggest beverage providers around. Hopefully, the share price gains will ultimately prove as refreshing as the beverages themselves.
Companies in This Article:
