Citi has indicated that ongoing inflationary pressures may lead to continued sales weakness in Pepsi's North American markets, which could weigh on the stock's performance.
The firm has downgraded the beverage giant's stock rating from Buy to Neutral and reduced its price target from $170 to $145, representing only about 5% upside from Thursday's closing price.
Analyst Filippo Falorni wrote in a client note on Friday, "We are downgrading Pepsi (PEP) to Neutral, primarily due to persistent softness in its two core North American segments: Frito-Lay North America and PepsiCo Beverages North America. Despite several strategic initiatives—including price reductions, new product innovation, and efforts to secure retail shelf space—the business has not shown improvement."
He added, "This weakness is also expected to create a headwind for 2027 performance. The company's results in 2027 will be compared against the high-investment, new product launch cycle of 2026, while persistently high cost inflation will continue to pressure margins."
As consumers have generally cut back on spending due to rising food and fuel prices linked to Middle East tensions, Pepsi's stock has fallen approximately 12% over the past three months.
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