Analyzing Potential Headwinds for PepsiCo Stock

One of the standouts of today's afternoon trading session has been PepsiCo, which logged a -1.5% drop and underperformed the S&P 500 by -1.0%. The Beverages stock is now trading at $175.3 per share and is -12.48% below its average target price of $200.29. Analysts have set target prices ranging from $156.0 to 220.0 dollars per share, and have given the stock an average rating of buy.

The market seems to share this optimistic view, since PepsiCo has a short interest of only 0.8% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of PepsiCo, institutional investors own 76.0% of the shares, which indicates they have a very high stake in the company. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in PEP, it probably means they believe it is a solid investment choice.

But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.

To sum up, PepsiCo is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a buy rating, a very low short interest, and an average number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.

Here's a snapshot of some important facts to keep in mind about PEP:

  • The stock has trailing 12 month earnings per share (EPS) of $5.7

  • PepsiCo has a trailing 12 month Price to Earnings (P/E) ratio of 30.8 compared to the S&P 500 average of 15.97

  • The company has a Price to Book (P/B) ratio of 13.65 in contrast to the S&P 500's average ratio of 2.95

  • PepsiCo is a Consumer Staples company, and the sector average P/E and P/B ratios are 24.36 and 4.29 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.