PepsiCo, which has struggled to maintain its market share in North America, got a double dose of bad news Monday from analysts worried about its pricing strategy and recovery prospects.
The two bearish sentiments weighed on the soft drinks and snacks maker, sending shares down 0.5% to $127.93. The stock was on pace to close at its lowest level since April 2020, according to Dow Jones Market Data.
TD Cowen analyst Robert Moskow lowered his Pepsi stock price target to $133 from $145 while maintaining a Hold rating, saying that management's goal to increase prices on chips, soda, and dips in 2027 to offset cost inflation is risky. Coupled with Pepsi's continued market share losses in the U.S., this increases the stock's risk profile in 2027, he wrote in a note Monday.
Deutsche Bank analyst Steve Powers downgraded the stock to Hold from Buy and lowered his price target to $138 from $155. The firm wrote that it isn't as confident in the company's ability to ensure a "durable recovery" in PepsiCo Foods North America.
In late 2024, PepsiCo launched a turnaround plan for its North American market to revive its Frito-Lay and Beverage divisions by rolling out affordability promotions, expanding shelf space, and cutting costs.
Powers previously believed that plan was working. Now, nearly two years in, Powers wrote that the recovery has taken too long, gotten too expensive, and has failed to show sustainable proof of success.
Powers added that several of the initiatives have "produced mixed or fleeting benefits," saying that both PepsiCo Foods North America and PepsiCo Beverages North America have struggled to improve in consumption and organic growth.
In Pepsi's fiscal second-quarter earnings, released July 9, sales volumes for the North America beverages division fell 4% from a year earlier, signaling the company's struggle to maintain its market share. Pepsi's international business helped propel its top-line growth. The company will release its fiscal third-quarter earnings next Thursday.
Separately, Pepsi will invest $1 billion in Colombia over five years that will boost production, support more than 2,000 farmers, and strengthen Colombia's small shopkeepers, Colombia President Abelardo de la Espriella said in a social media post Sunday.