Pepsi Target at Wall Street High on Expected Wider Margins

PepsiCo  (PEP) – Get Report was upgraded by Citigroup analyst Wendy Nicholson to buy from neutral, as she anticipated wider profit margins at the drinks-and-snacks giant.

Nicholson raised her share-price target to $169 — a Wall Street high, according to Bloomberg — from $148. 

Pepsi shares recently traded at $141.76, up 2.4%. They have risen 3% year to date, while the S&P 500 has gained 9% during that period.

The new target indicates 22% upside for the stock from Friday’s close at $138.44.

Improving operating margins could boost Pepsi shares, Nicholson wrote in a commentary cited by Bloomberg. The stock’s multiple should “expand considerably from current levels,” she said

“Structural issues as a result of its business mix” have pressed the Purchase, N.Y., company’s operating margin thinner than that of giant consumer-staple peers Procter & Gamble  (PG) – Get Report and Coca-Cola  (KO) – Get Report, even as Pepsi has the “most consistent organic-sales growth of the three,” she said.

Pepsi’s beverage business has lagged behind food during the Covid pandemic.

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