Should I buy PepsiCo shares after UBS raised its price target to $165?

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 May 28, 2021
  • The U.S. President Joe Biden will propose a $6 trillion budget to boost the economy
  • UBS upgraded PepsiCo shares and increased its price target from $145 to $165
  • PepsiCo is expanding its partnership with FAT Brands

PepsiCo, Inc. (NASDAQ: PEP) shares are advancing this Friday, and the technical picture implies that the price could reach $150 resistance in the upcoming days. The U.S. stock market also remains supported as the prospect of a $6 trillion budget from U.S. president Biden helped lift investors’ mood.

Fundamental analysis: UBS upgraded PepsiCo shares

Wall Street’s three main indexes are advancing this Friday after better than expected data released from the U.S., which confirmed that the economy continues to recover from the pandemic. The country has reported a drop in jobless claims and a 1% rise in core durable goods serving to highlight the improvements seen in April and May.

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The prospect of a $6 trillion budget from Joe Biden that includes a huge provision for infrastructure projects is also positive news for the stock market. PepsiCo shares continue to be supported, and for now, everything indicates that the price could soon reach the $150 resistance level.

Macroeconomic data are signaling a steady economic comeback; still, if FED decides to tighten its ultra-loose monetary policy, the U.S. stock indices will probably be at lower price levels.

PepsiCo continues to expand its business, and according to the latest news, the company is expanding its partnership with  FAT Brands to include the Fatburger, Johnny Rockets, Elevation Burger, Buffalo’s Cafe, and Buffalo’s Express brands.

“Our holistic partnership with FAT Brands boosts our shared ability to deliver the best and most modern consumer experiences by enhancing its restaurants’ range of delicious dishes with our breadth of beloved brands,” said Hugh Roth, Chief Customer Officer at PepsiCo Foodservice.

PepsiCo faces competition from Coca-Cola, but according to estimates, PepsiCo has more room to grow than Coca-Cola and represents a better opportunity for investors. The board of directors declared a $1.075/quarterly share dividend this month, representing a 5.1% increase from the prior dividend of $1.0225.

PepsiCo has a strong demand for its products and the right management team to scale and improve efficiency. UBS upgraded PepsiCo shares and increased its price target from $145 to $165 on expectations that the company will yield a sustainable improvement to the top and bottom-line growth.

“We believe modest multiple expansion with consistent earnings upside and the opportunity for long-term algorithm improvement should offer 14% upside potential,” UBS reported.

PepsiCo trades at around sixteen times 2020 EBITDA, and with a market capitalization of $204.90 billion, shares of this company are fairly valued.

Technical analysis: $150 represents the first resistance level

Data source: tradingview.com

The critical support levels are $140 and $135; $150 and $155 represent the current resistance levels. If the price jumps above $150 resistance, it would be a signal to trade PepsiCo shares, and the next target could be around $155.

On the other side, if the price falls below $140, it would be a strong “sell” signal, and the next target could be around $135.

Summary

PepsiCo shares continue to be supported, and for now, everything indicates that the price could soon reach the $150 resistance level. PepsiCo continues to expand its business, and if the price jumps above $150 resistance, the next target could be around $155.

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