PepsiCo (PEP) Stock Forecast & Price Target

PepsiCo has demonstrated strong financial performance, with its Frito-Lay North America (FLNA) division achieving growth rates of approximately 16% in 2022 and around 10% in 2023, despite experiencing effectively flat volumes during the same period. The company is strategically enhancing its pricing strategy and driving innovation, which is expected to support a conservative outlook of 2.1% organic sales growth through 2026, with potential for upside. Additionally, PepsiCo's preliminary 2026 guidance surpasses prior operating expectations, indicating improved visibility on future profitability, augmented by a one-time non-operational benefit related to recent plant closures.

PepsiCo's stock outlook is negatively influenced by historical data indicating a significant contraction in its forward price-to-earnings (P/E) ratio during past economic downturns, with a drop of nearly 40% from an average of 20x to 12x during the 2008–09 recession. Current macroeconomic pressures and specific challenges within its carbonated soft drink (CSD) category, particularly affecting diet offerings, alongside a decelerating Frito-Lay business, are expected to restrict top-line growth. Furthermore, the company’s beverage segment is reportedly losing market share, suggesting that strategic adjustments, such as potential refranchising of bottling operations in North America, may be necessary to address these challenges.