JPMorgan downgraded beverage giant PepsiCo (NASDAQ:PEP) to Neutral from Overweight, lowering its price target to $176 from $185 per share in a note Tuesday. The shift in stance comes despite JPMorgan acknowledging PepsiCo's "well-positioned" state and confidence in its 2024 outlook.
Analysts at JPMorgan said they "don't see anything fundamentally wrong" with PEP and continue to have confidence in the business and its ability to deliver on its 2024 outlook. However, they see limited potential for further upward revisions to earnings forecasts and believe more attractive investment opportunities exist elsewhere within the beverage sector.
Specifically, JPMorgan highlighted Coca-Cola and Keurig Dr Pepper, citing their "higher quality composition of top-line growth" in 2024 and the lack of the overhang associated with the PEP GLP-1 concerns.
The revised price target of $176 reflects a 20x price-to-earnings multiple applied to JPMorgan's CY2025 earnings per share estimate of $8.82. "We believe PEP’s current valuation already reflects the bull & bear debate," analysts at the investment bank stated.