PEP: Mixed Ratings And FY25 Outlook Will Shape Near-Term Risk Reward

Analysts have nudged their blended fair value estimate for PepsiCo modestly higher to approximately $154 from about $153, reflecting slightly stronger expected revenue growth and a marginally richer future P E multiple, partly offset by a higher discount rate and modestly lower profit margin assumptions embedded across recent target revisions.

Analyst Commentary

Street research on PepsiCo has become more mixed, with recent price target changes and rating shifts reflecting a balance between confidence in the company growth algorithm and caution around near term fundamentals and valuation.

Bullish analysts see room for upside, but even they are moderating expectations as volume trends soften and the discount rate rises, leaving less room for execution missteps.

Bullish Takeaways

• Bullish analysts highlight that the stock still offers mid single digit to high single digit upside to their updated price targets, which they view as reasonable given PepsiCo consistent track record of delivering on guidance.
• Upward rating moves toward Buy are supported by expectations that earnings growth in FY25 can re accelerate, helped by disciplined pricing, mix improvements, and ongoing cost efficiencies.
• Some see recent share price volatility as having reset expectations to a level where modest revenue outperformance or margin resilience could drive multiple expansion back toward the upper end of the historical range.
• Longer term, bulls continue to view the global snacks and beverages portfolio as structurally advantaged for steady cash flow growth, underpinning support for a premium, though not stretched, valuation.

Bearish Takeaways

• Bearish analysts point to a series of incremental price target cuts, arguing that softer international volumes and more cautious Q3 sales and margin assumptions limit near term earnings momentum.
• Several remain Neutral or Equivalent weight, contending that the current share price already discounts mid single digit revenue growth and stable margins, leaving only modest upside versus their fair value estimates.
• There is concern that sequential fundamental improvement may be limited in the coming quarters, which could cap the potential for a significant re rating even if guidance is maintained.
• The combination of slightly lower margin expectations and a higher cost of capital leads more conservative analysts to see risk that valuation drifts toward the lower end of historical multiples if execution stumbles.

What's in the News

• Freedom Capital downgraded PepsiCo to Hold from Buy and cut its price target to $164 after a post earnings rally, noting that the new target implies only about 7 percent upside despite Q3 beats and an improved FY25 EPS growth outlook (Periodicals).
• PepsiCo announced a landmark multi year global partnership with the Mercedes AMG PETRONAS F1 Team beginning in 2026, aligning Gatorade, Sting, and Doritos with Formula 1 to support performance programs and fan engagement worldwide (Key Developments).
• The company launched CRP 2.0, a major update to its open access Climate Resilience Platform, expanding crops, country coverage, and business focused climate risk analytics to support regenerative agriculture and supply chain resilience (Key Developments).
• PepsiCo appointed Steve Schmitt, currently CFO of Walmart U.S., as its next Chief Financial Officer effective November 10, 2025, with current CFO Jamie Caulfield staying on in an advisory role through mid 2026 (Key Developments).
• The company completed a $4.21 billion share repurchase program begun in 2022, having bought back 25.7 million shares, and indicated ongoing interest in tuck in M&A as part of its portfolio transformation strategy (Key Developments).

Valuation Changes

• The fair value estimate has risen slightly, moving from approximately $152.57 to about $154.41 per share, reflecting modestly improved expectations.
• The discount rate has increased slightly, from about 6.78 percent to roughly 6.96 percent, implying a marginally higher required return on equity.
• Revenue growth has risen modestly, with long-term assumptions moving from around 3.47 percent to approximately 3.61 percent annually.
• The net profit margin has edged down slightly, from about 11.49 percent to roughly 11.45 percent, indicating a small step down in expected profitability.
• The future P/E has increased marginally, from about 21.63x to roughly 21.75x, suggesting a slightly richer forward valuation multiple.