PepsiCo dips after Morgan Stanley pulls its bull rating

PepsiCo (NASDAQ:PEP) slipped in early trading on Friday after Morgan Stanley downgraded the food and beverage stock. The firm moved to an Equal Weight rating on PepsiCo (PEP) after being in the bull camp since March.

Analyst Dara Mohsenian warned that PepsiCo’s (PEP) market share is deteriorating in U.S. scanner data to Coca-Cola (KO) and Keurig Dr Pepper (KDP).

“None of Pepsi’s major product categories are gaining or holding share yoy in Q3TD, and only 14% of mix did in Q2, much worse than about half of its categories in each of the prior seven quarters, so PEP’s recent breadth of share losses is wide.”

Looking ahead, Mohsenian said that if recent reinvestment, which has been funded so far with cost savings, does not drive greater payback, the need to fund additional reinvestment in 2025 will likely drive below long-term algorithm EPS marks

Morgan Stanley assigned a base case price target on PepsiCo (PEP) of $185 to imply upside potential of just 6%.

Shares of PepsiCo (PEP) were down 1.15% in premarket trading on Friday, after dipping 0.31% on Thursday after Target (TGT) nabbed Jim Lee away from the company to be the retailer’s new CFO. BNP Paribas analyst Kevin Grundy emphasized that the news is clearly suboptimal for the food and beverage giant. He noted Lee was beginning to build his profile with investors and was undoubtedly in pole position to replace PEP’s current CFO, Jamie Caulfield, at some point in the future when Caulfield chooses to retire. “Moreover, this comes on the heels of the surprising departure of Hugh Johnston, PEP’s long-time CFO, who left to become Disney’s CFO back in November 2023,” added Grundy.