The market’s valuation of PepsiCo (NASDAQ:PEP) is “as good as it gets,” according to Morgan Stanley analysts.
“This is another single stock rating change that fits into our broader thesis of shifting to names with more risk, but also much greater reward, as high visibility names and those with pricing power (our prior preferred names) now offer less upside from here with stretched valuation levels,” the analysts said in a downgrade note.
They cut the rating on PEP stock to Equal Weight from Overweight after shares moved further higher following a strong Q2 earnings report. The price target is maintained at $210 per share.
“We see it [PEP stock] as now fairly valued post large stock outperformance with catalysts played out & PEP at modern-day record valuation highs vs. multiple peers.”
“PEP relative valuation is now near a modern-day record relative high vs. its closest peers KO, as well as KDP, and a broader set of mega-cap CPG names (CL/PG/KO).”
Moreover, the analysts also see limited upside vs consensus for the second half of the year.
PepsiCo recently delivered better-than-expected Q2 results and boosted the full-year organic revenue guidance to +10%, up from the prior +8%.