Should I buy PepsiCo shares after a positive view from Morgan Stanley?

By: Stanko Iliev
Stanko Iliev
Stanko is a Financial Analyst for Invezz covering stocks, cryptocurrencies, and worldwide indices. He has significant experience trading forex,… read more.
on Sep 30, 2021
  • Pepsi shares have weakened from their record highs above $159
  • $145 represents a strong support
  • The outlook for PepsiCo remains positive

PepsiCo, Inc (NASDAQ: PEP) shares have weakened from their record highs above $159, registered in August 2021, and the current price stands at $151. PepsiCo continues to improve its position in the market, and Morgan Stanley increased its price target on PEP shares this trading week.

The outlook for PepsiCo remains positive, according to Morgan Stanley

PepsiCo continues to improve its position in the market, and if you are looking for a solid return potential, shares of this company can be a good choice for long-term investors. The company reported better than expected second-quarter results; total revenue has increased by 20.5% Y/Y to $19.22 billion, which was more than expected, while the GAAP EPS was $1.70 (beats by $0.18).

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Morgan Stanley increased its price target on PEP shares this trading week to $172 and announced that the outlook for PepsiCo remains positive. Dara Mohsenian, an analyst from Morgan Stanley, added:

“We expect another PEP EPS beat in Q3, and another quarter of strong organic sales growth confirming higher LT topline growth after Pepsi’s reinvestment in marketing/cap-ex in recent years. Valuation still looks compelling with Pepsi at only a ~3% CY23 EV/EBITDA premium to lower growth food peers.”

The momentum the company achieved during the last several months reflects improved market conditions, combined with adding market share, including taking away customers from its biggest competitor, Coca-Cola. PepsiCo expects to deliver 6% organic revenue growth for the 2021 fiscal year and EPS of $6.20 vs. a consensus of $6.09.

J.P.Morgan sees potential risks for the upcoming quarters mainly due to inflation and covid concerns, but the company’s management announced that PepsiCo is well prepared for unexpected conditions. PepsiCo and Beyond Meat recently announced a partnership to release their products made from plant-based proteins in early 2022.

This is certainly positive news, and it is important to mention that PepsiCo plans to reach zero net emissions by 2040 and hopes the movement will provide it with a competitive advantage. With the partnership with Boston Beer, PepsiCo also entered into the alcoholic beverage space, and the first products are expected to be available in the early part of next year.

PepsiCo’s balance sheet remains stable, the current dividend yield is around 2.8%, and with a market capitalization of $208 billion, shares of this company are fairly valued.

Pepsi shares have weakened from their record highs

Data source: tradingview.com

PepsiCo shares have weakened from their record highs above $159, and if the price falls below $145 support, it would be a strong “sell” signal. On the other side, if the price jumps again above $155 resistance, it would signal trading shares, and the next target could be around $158 or even 160.

Summary

PepsiCo shares have weakened from their record highs above $159, but Morgan Stanley increased its price target on PEP shares this trading week to $172. The outlook for PepsiCo remains positive, according to Morgan Stanley, while J.P.Morgan sees potential risks for the upcoming quarters mainly due to inflation together with covid concerns.

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