Fake Value
Today, PepsiCo reported mixed quarterly results. Total revenue of $24.18 billion beat Wall Street expectations. However, organic growth of 2.4% came in below forecasts, while adjusted earnings per share of $2.20 narrowly missed estimates.
In the key North American market, consumers continue to cut back amid inflation and high gasoline prices. To win shoppers back, PepsiCo slashed prices on medium-sized packs of brands like Lay’s and Doritos by as much as 15%. While the move helped stabilize volumes, it also pushed revenue in the company’s North American food business down 2%. In other words, the discounts are eating away at growth.
$PEP has been facing the same problems for years: stagnant revenue, rising costs, and weak consumer demand. As a result, the stock has been stuck in a volatile sideways range since 2022.
In my view, neither the weak underlying fundamentals nor the stock’s significant underperformance relative to the Nasdaq are likely to improve over the next few years. I don’t see PepsiCo as an attractive investment, it’s a case of fake value, in my opinion.
