Is PepsiCo Stock Fairly Valued?

KIEV, UKRAINE – September 12th, 2018: The PepsiCo Food company logo is seen… [+] on a smartphone in this photo illustration. (Photo courtesy of Getty Images/Igor Golovniov/SOPA Images/LightRocket)
Getty Images/LightRocket
PepsiCo’s stock (NASDAQ: PEP) has gained over 12% in the last year and now trades at $149 per share, much above levels observed shortly before the coronavirus pandemic. The stock’s rise was fueled by both macro and company-specific factors. Expectations of a faster economic rebound and more consumer spending have risen as a result of the stimulus measures and effective vaccination distribution. This will help a food and beverage behemoth like PepsiCo increase sales and profit margins. In the snacks segment, which is mostly consumed at home, the company produced strong Q1 2021 earnings with impressive margins. In Q1, for example, Frito-margins Lay’s were 29 percent. Furthermore, the recent surge is a reflection of the company’s ongoing innovation. PepsiCo, which has benefitted from the at-home consumption trend, has just developed the Neon Zebra, a non-alcoholic cocktail mixer, in four various flavors in order to capitalize on the at-home cocktail making trend. It also introduced a new juice line (Frutly) for its younger customers. New products launched to capitalize on current consumer trends and at a time when the economy is expected to revive have led to forecasts of robust sales and earnings growth in the coming quarters. But, will PepsiCo’s stock continue to rise in the future months, or will a stock correction be more likely? Returns for PEP stock are expected to average close to 4.6 percent in the next one-year (252 trading days) period, according to the Trefis Machine Learning Engine, which finds trends in a company’s stock price data from the last 10 years. But how do these figures vary if you want to hold PEP stock for a shorter or longer period of time? On the Trefis Machine Learning, you may test the response and many more combinations to see if PEP stock would climb following a decline and vice versa. You can evaluate the likelihood of recovery across time intervals of a quarter, month, or even a single day!
TRY THE MACHINE LEARNING ENGINE FOR YOURSELF:
IF PEP stock moves -5 percent over five trading days, then it will move an average of 4 percent over the next 21 trading days, with a 68 percent chance of a positive return in the next month.

Trefis Average Return
Making Sense of PEP Stock Movements: Some Fun Scenarios, FAQs, and Making Sense of PEP Stock Movements:
Question 1: Is PepsiCo stock’s average return higher following a drop?
ADDITIONAL INFORMATION FOR YOU
Answer:
Consider the following two scenarios:
Case 1: In a week, PepsiCo’s stock dips by 5% or more.
Case 2: PepsiCo’s stock rises by at least 5% in a week.
Is the average return on PepsiCo stock higher after Case 1 or Case 2 in the following month?
After Case 1 (where the stock has just suffered a 5% loss over the previous week), PEP stock performs better, with an average return of 4.1 percent over the next month (21 trading days) versus an average return of 0.5 percent for Case 2 (where the stock has just suffered a 5% loss over the previous week).
In example, the S&P 500 has an average return of 3.1 percent in Case 1 and barely 0.5 percent in Case 2 over the next 21 trading days, according to our dashboard, which shows the average return for the S&P 500 after a decline or rise.
Use the Trefis machine learning engine to evaluate how PepsiCo stock is expected to respond following any certain gain or loss over a period of time.
Question 2: Does it pay to be patient?
Answer: If you buy and hold PepsiCo stock, you may anticipate near-term swings to fade with time, and a long-term favorable trend to favor you – at least if the company is otherwise healthy.
Overall, facts and Trefis’ machine learning engine estimates show that patience pays off in most stocks!
The following table shows the returns for PEP stock over the next N days after a -5 percent shift over the previous 5 trading days, as well as the returns for the S&P500:

Trefis Average Return
Question 3: If you wait a bit following a climb, what is the average return?
Answer: As mentioned in the preceding question, the average return after a rise is lower than after a decrease. Surprisingly, most equities would be better avoided as short-term investments if they had gained in the previous few days.
The table below shows PEP’s returns over the next N days after a 5% shift over the previous 5 trading days, as well as the S&P500’s returns:

Trefis Average Return
By adjusting the variables in the charts above, you can test the trend for PepsiCo stock for yourself.
Retail revenues are being eroded by e-commerce, yet this could be an investment opportunity. A wide range of companies that stand to benefit from the huge change may be found in our E-commerce Stocks topic.
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