$PEP - PepsiCo, good evening friends,
Last night we conducted a poll about PepsiCo stock, which dropped 20% from its peak earlier in May 2024.
We asked you if you think PepsiCo stock is cheap or expensive at its current price?
The poll results are 50/50!
Such a close vote has never been here before!
So who is right? Who is wrong? By the end of this reading, you will decide!
Today we will talk about one of the most interesting and respected dividend stocks on Wall Street - the one known as the 'Dividend Queen' - PepsiCo!
PepsiCo dropped 20% from its peak in May 2024 - and the question arises...
Why and for what reason?
Before examining a stock that has taken a big hit - it's always worth digging into the circumstances:
Understanding the full story can help us understand if it's a short-term challenge or something more serious.
In PepsiCo's case - several circumstances led to the recent declines in the stock:
1) Slowdown in demand in key markets, especially among American consumers - which created a significant headwind - despite strong international growth.
2) A recall of the company's famous Quaker product - which particularly affected the Quaker Food division and led to an 18% drop in product sales.
3) And if all that wasn't enough - add to that the candidate for the new US Secretary of Health - Robert Kennedy - who is known for his extremism and statements about sweet food companies - which raises concerns about new health regulations that could affect the company's operations.
Mix all these circumstances - and we got a 20% drop from the peak in May 2024 as of now.
But does such a sequence of circumstances justify a 20% hammer blow to PepsiCo stock?
- Is the stock expensive or cheap now?
- What do the data say?
- And what does Wall Street think about the current stock price?
Let's begin!
First - let's start with the facts:
1. International reach: PepsiCo's brands like Pepsi, Gatorade, Quaker, Doritos are distributed and sold in over 200 countries!
2. Historical resilience: PepsiCo has been operating for over 125 years, thriving and growing throughout its operations despite numerous challenges it faced over the years, declines and fluctuations - PepsiCo remains focused on supplying beverages, snacks, and a variety of tasty products - and continues to grow and expand from time to time.
3. Dividend queen: PepsiCo boasts exceptional dividend growth statistics - 53 years of increasing dividends - in the last 20 years, PepsiCo has quintupled its dividend - the current dividend is approaching 4% annually!
4. Constant growth: PepsiCo continues to expand by acquiring popular food brands worldwide - and together with its supply chain, connections, and industry knowledge - PepsiCo is constantly growing and fighting against growth slowdown!
But despite all this - PepsiCo continues to take hits and is approaching its lowest price to earnings ratio in over a decade (!)
Is the market too pessimistic?
Let's see what Wall Street says:
Meanwhile on Wall Street - the most pessimistic analysts give PepsiCo a price target of $170.
And the optimistic analysts give PepsiCo a price target of $200.
And what do hedge funds say?
Note this: Hedge funds and institutional investors recently added PepsiCo to their portfolios -
For example: The hedge fund - Global Wealth Strategies & Associates recently increased its holdings in PepsiCo by 59% and the hedge fund Rakuten Securities increased its holdings in PepsiCo by 94%.
It seems that despite the challenges - even the most pessimistic analysts set a higher target for PepsiCo than the current price - which stands at $146.
Add to this that PepsiCo's dividend yield is approaching 4% annually (probably more than the deposit you would get in the bank) and here is an interesting value-dividend stock to follow!
(For all the above information, we have attached data in the images above)