PepsiCo raised to buy as Citi sees a good set-up

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PepsiCo raised to buy as Citi sees a good set-up
Credit: © Reuters.

PepsiCo (NASDAQ: PEP ) shares were raised to Buy from Neutral at Citi on Monday, with analysts raising the price target to $195 from $180 per share.

Analysts told investors that their firm believes the lowered 2024 organic sales growth (OSG) bar creates a good set-up for the stock.

"PEP has been a heavily debated stock over the last six months after providing initial 2024 guidance at the high-end of LT targets at Q3 (instead of Q4 historically), which the market expected to be cut," explained analysts.

"This catalyst materialized at Q4 with PEP lowering the OSG target to 'at-least 4%' (vs. upper-end of +4-6% prior)," they added.

Citi believes that with a lower/more achievable OSG bar and a reset in market expectations, the set-up looks more favorable given "PEP's track record of meeting/beating guidance."

"We acknowledge volumes will likely remain pressured in 1H24 (we continue to believe Buy-rated KO will post superior volume trends), but believe that is now understood and reflected in the stock's ~700bps L6M underperformance, with its current ~20.5x CY24E P/E valuation ~14%/13% below peers/PEP’s L5Y average," analysts concluded.

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