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Be Happy Pepsi Investors, Morgan Stanley Just Made A Bullish Move

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Analysts at Morgan Stanley on Wednesday reiterated an Overweight rating and $112 price target on PepsiCo, Inc. (NYSE: PEP). The firm based its rating on PepsiCo's valuation discount versus peers, thinking the gap will close as the company boasts superior top line and EPS growth.

Shares of PepsiCo recently traded at $92.64, down 1.6 percent.

While Morgan Stanley prefers The Coca-Cola Co (NYSE: KO) for the next couple of quarters, "as it has more potential catalysts post recent favorable strategy changes and vs negative investor sentiment," longer-term they believe PepsiCo can trade at a P/E premium to Coca-Cola or even Procter & Gamble Co (NYSE: PG).

According to the report, Morgan Stanley's analysts "believe the growth and return prospects at Pepsi, as well as EPS quality, have materially improved vs. KO and PG in the past few years; this, in our minds, should clearly justify a valuation premium."

The thesis is based on three main points:

  • Pepsi's superior fundamental performance.
  • "Strategic Options: While PEP has indicated it is not splitting up or pursuing structural changes in NA beverages, strategic options could re-emerge at some point if Pepsi's recent turnaround stalls, and shareholder activism should help prop the stock up."
  • Valuation looks attractive.

Latest Ratings for PEP

Jan 2017BarclaysInitiates Coverage OnEqual-Weight
Oct 2016CitigroupMaintainsNeutral
Sep 2016JefferiesMaintainsBuy

View More Analyst Ratings for PEP
View the Latest Analyst Ratings

Posted-In: Morgan StanleyAnalyst Color Reiteration Analyst Ratings


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