PepsiCo Inc is gearing up to claim the title of the largest US beverage company by market value, outpacing its longstanding rival, Coca-Cola Co. Wall Street is abuzz with projections from prominent analysts, none more notable than Kaumil Gajrawala of Jefferies. Gajrawala, who has bestowed a buy rating upon PepsiCo, foresees a remarkable surge of over 20% in the company’s shares over the next year, reaching an impressive $203. This surge is expected to elevate PepsiCo’s market value to a staggering $279 billion, effectively eclipsing Coca-Cola’s current market cap of approximately $277 billion.
Gajrawala’s forecast places a $64 target on Coca-Cola, accompanied by a “hold” rating. Traditionally, Coca-Cola has maintained its perch as the industry leader, thanks to an extensive portfolio of brands and a steadfast trajectory of sales growth. However, PepsiCo’s strategic diversification into the food business, incorporating Frito-Lay North America, Quaker oatmeal, and more, has emerged as a pivotal differentiator.
Over the last half-decade, PepsiCo has committed a substantial $60 billion to enhance operational efficiency, bolster production capacity, and fortify its branding efforts. Analysts anticipate that this strategic move is poised to yield significant dividends for the company. Notably, PepsiCo’s unwavering dependability, even in the face of economic challenges such as the Covid-19 pandemic, has garnered commendation.
Gajrawala remains optimistic about PepsiCo’s sustained growth, projecting robust earnings for the company over the next three years. This optimism is in stark contrast to Coca-Cola, which has been met with a lukewarm reception. Sporting a consensus rating of 4.6 out of five, compared to PepsiCo’s 4.1, Coca-Cola is grappling with a perpetual struggle to identify catalysts for growth. This growing disparity is reflected in the performance of both stocks this year, with PepsiCo experiencing a modest 7% decline in share prices, while Coca-Cola has faced a more substantial 10% drop.
Both beverage giants, PepsiCo and Coca-Cola, are contending with a common threat posed by the potential reduction in indulgences among individuals taking GLP-1 drugs. However, prevailing sentiment suggests that PepsiCo is better positioned to weather this challenge and maintain its numero uno status.
In light of these developments, it is increasingly evident that PepsiCo is emerging as the frontrunner in the race for the title of the largest US beverage company, challenging even industry stalwart Coca-Cola. Bolstered by financial efficiency and a robust brand portfolio, PepsiCo appears poised to dethrone Coca-Cola and ascend to new heights. As the industry undergoes a transformative phase, all signs point to PepsiCo as the company ready to seize the opportunity and redefine the beverage landscape.
Source: Bloomberg
