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

Shares of PepsiCo, Inc.

are down Wednesday morning, even though analysts at Morgan Stanley reiterated an OverWeight rating and a $112 price target on the stock. The firm bases its rating on PepsiCo's valuation discount versus peers. They think the gap will close as the company boasts superior top line and EPS growth. While Morgan Stanley prefers The Coca-Cola Co

short term, 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

. According to a report issued Wednesday morning, 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 Overweight thesis is bases 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