Is December a good month for buying PepsiCo shares?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 10, 2020
Updated: Dec 11, 2020
  • Wells Fargo and Citigroup raised their price targets on PepsiCo shares
  • PepsiCo has more room to grow than Coca-Cola, according to Citigroup
  • PepsiCo declared a $1.0225/share quarterly dividend, which is in line with the previous

PepsiCo (NASDAQ: PEP) shares have advanced from $133 above $146 since the beginning of November, and the current price stands around $144. Wells Fargo and Citigroup upgraded PepsiCo shares after the company posted better than expected results in Q3.

Fundamental analysis: Total revenue has increased by 5.2% in Q3

PepsiCo is an American multinational food, snack, and beverage corporation that distributes its products in more than 200 countries. The company faces competition from Coca-Cola, but according to some analysts, PepsiCo has more room to grow than Coca-Cola and represents a better opportunity for the investors.

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PepsiCo shares have advanced after the company reported better than expected Q3 results; total revenue has increased by 5.2% Y/Y to $18.09B while Q3 GAAP EPS was $1.65 (beats by $0.18). The company declared a $1.0225/share quarterly dividend, which is in line with the previous.

The stock price was also supported by the information that Citigroup hiked its price target on PepsiCo to $169 in October. According to Citigroup, PepsiCo has more room to grow than Coca-Cola, and the company could expand its market share even more in the upcoming years.

Wells Fargo has also raised its price target to $157 on PepsiCo, which is 23.5X the 2022 EPS estimate. “PEP results have been resilient amidst COVID, and with a consistent algorithm and valuation in line with historicals, we expect the stock to track the group,” said analyst Chris Carey from Wells Fargo.

PepsiCo continues to expand its business, and according to the latest news, the company extends its partnership with football’s elite UEFA Champions League for the 2021/22 season. “Since becoming a sponsor in 2015, the PepsiCo and UEFA partnership has become stronger and more exciting each year”, said Ram Krishnan, PepsiCo Global Chief Commercial Officer.

At the current market capitalization of $199B, this stock is still undervalued relative to the market, but maybe now is not the right moment to invest in PepsiCo shares because the price could weaken in the upcoming period. COVID-19 cases in the US continue to rise, and the US stock market could enter the correction phase this December; if this happens, PepsiCo shares will probably be at much lower price levels.

Technical analysis: PepsiCo shares continue to trade in a bull market

This stock continues to trade in a bull market this December, but now is not the best moment for buying PepsiCo shares.

Data source: tradingview.com

The current support levels are $140 and $130; $ 150 and $155 represent the resistance levels. If the price jumps above $150 resistance, the next target could be around $155, but if the price falls below $130, it would be a firm “sell” signal and maybe a sign of the trend reversal.

Summary

PepsiCo shares are still undervalued relative to the market, but maybe now is not the best moment to invest in PepsiCo shares. COVID-19 cases in the US continue to rise, and the US stock market could enter the correction phase this December; if this happens, PepsiCo shares will probably be at much lower price levels. If the price falls in the upcoming period, every price in a range from $100 – $120 could be a good opportunity to invest in PepsiCo shares.

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