The analysts, led by Kaumil Gajrawala, see the Purchase, N.Y., snacks-and-beverages giant benefiting from the coronavirus in the short term and from buoyant North American beverage sales in the medium term.
They raised their share-price target to $144 from $138. At last check, Pepsi shares traded at $121.90, up 1.4%.
“The Covid-19 highlights the defensive nature of PepsiCo: strong positions in water, sports drinks, juice brands,” they wrote in a commentary.
“And it’s a beneficiary of snack-pantry loading. Direct store delivery distribution is a competitive advantage,” enabling Pepsi to strengthen its relationship with retailers, Gajrawala wrote.
What’s happening at Pepsi is “a cultural shift and the most aggressive capital deployments we have seen in years,” the analysts said.
Its $12 billion investment in less than two years will “reap benefits over multiple years.”
As for North American beverages, which account for a third of Pepsi’s revenue and, the analysts say, are the company’s weakest division, “we see signs [it] is poised to improve."
“We now think North American top line can go to 3% to 4% growth on improved industry dynamics, portfolio evolution and increased spending,” they said. Profit margins can widen substantially, too, the analysts said.
Earlier this week, Morgan Stanley and RBC Capital Markets raised their ratings on Pepsi.
Morgan Stanley analysts, led by Dara Mohsenian, upgraded Pepsi to overweight from equal weight, though they lowered their share-price target to $132 from $145, reflecting the stock’s recent decline.
RBC Capital Markets analysts, led by Nik Modi, boosted Pepsi to outperform from sector perform and raised their target price to $153 from $115.