Recent analyst activity focused on major shifts in outlook, including upgrades for Toll Brothers (TOL) and PepsiCo (PEP). Toll Brothers received an upgrade due to anticipation of beneficial housing aid from the Trump administration, while PepsiCo’s rating improved as its valuation compressed to a decade low and activist Elliott Management pushed for cost reductions. Downgrades were issued for global miner Rio Tinto (RIO) and beverage maker Constellation Brands (STZ).
Upgrades
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PepsiCo (PEP): Upgrade Sell to Hold by Julia Ostian. The upgrade is driven primarily by the valuation compressing to a 10-year low, combined with activist Elliott Management’s success in pushing management toward cost-cutting and pricing fixes.
“The primary driver for my shift from Sell to Hold is not an improvement in business quality, but rather a reset in expectations. When I opened a price-to-earnings (P/E) ratio on a forward basis, I was surprised to see that PepsiCo is currently trading around 16.3x, which is almost the lowest valuation level we have seen in the last decade. … I am upgrading my rating to Hold solely because the valuation has compressed to a point where the bad news is priced in, and Elliott’s involvement could spark a turnaround.”
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Toll Brothers (TOL): Upgrade Hold to Buy by Caffital Research. The stock is reasonably priced even with the current outlook, but the potential for the Trump administration to introduce measures to aid housing market demand provides meaningful upside potential that could lead to a significant recovery after FY2026.
“The current valuation supports good upside in the investment, in my opinion providing an attractive entry point. Upside is ultimately dependent on a housing market recovery. Regardless, Toll Brothers has also continued to generate very healthy earnings even amid more subdued housing demand, supporting the current stock price at a forward P/E of just 11.3.”
Downgrades
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Rio Tinto Group (RIO): Downgrade Overweight to Neutral by Mare Evidence Lab. The analyst prefers a wait-and-see approach due to valuation being full on a standalone basis, coupled with the structural complexity, execution risk, and regulatory scrutiny created by renewed merger discussions with Glencore.
“Executing a merger of this scale is inherently complex, particularly when it involves two companies that sit at the very top of the industry. … Valuation matters, and we cannot ignore the Glencore merger noise (and potential execution risks in this transaction). At this stage, we prefer a wait-and-see approach.”
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Constellation Brands (STZ): Downgrade Hold to Sell by Hawkinvest. Despite a post-earnings spike, the stock faces challenges from significant debt, declining revenues with guidance lowered for FY2026, and persistent secular trends showing plunging alcohol consumption.
“With a history of recent declines in revenues and a significant debt load that dwarfs the cash on the balance sheet, I believe this stock could be a value trap and even head lower. … I see a significant opportunity cost in remaining a shareholder in this stock overall.”