Morgan Stanley upgraded PepsiCo (PEP) to Overweight from Equal Weight with a $190 price target. The analyst names PepsiCo the firm’s top pick, both in beverages and overall, replacing Constellation Brands (STZ) in beverages as it top pick and Colgate (CL) as its overall top pick. The firm had been concerned that PepsiCo’s valuation was priced to perfection and consensus estimates were too high with an unrealistic volume rebound as pricing dissipated. Both of these issues have now played out, and Morgan Stanley “would be aggressive buyers here ahead of a powerful inflection” in second half of 2024 after PepsiCo “bottoms fundamentally” in Q1, and returns to above consensus and peer growth, the analyst tells investors in a research note. The firm believes the stock’s valuation compression is overdone.
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