Key Takeaways:
- Price Target: PepsiCo stock is valued at $169 based on forward assumptions reflecting margin expansion and steady earnings growth.
- Upside Potential: The target implies 13% total return from the current price of $149 as earnings compound through 2027.
- Annual Returns: This projection translates to 7% annualized returns over the next 2 years under stable valuation multiples.
- Margin Expansion: Operating margins rising to 16% support earnings leverage despite revenue growth moderating to 3%.
PepsiCo (PEP) is a global food and beverage company selling snacks and drinks across seven regions, generating $92 billions in revenue over the last year.
Recent news includes a 10-year biomethane supply agreement announced last week, beginning in 2027, supporting PepsiCo’s energy transition across its UK operations.
In the most recent quarter, PepsiCo delivered $24 in revenue and $3 in net income, showing steady demand across snacks and beverages.
The business delivered 15% operating margins, reflecting pricing discipline and cost control across a company with a market value near $210 billion.
While growth drivers and efficiency improve, PepsiCo trades at 17x earnings, raising questions about valuation versus execution.
What the Model Says for PEP Stock
We analyzed Pepsi stock using recent operating results, capital returns discipline, global snack leadership, and conservative assumptions reflecting mature consumer demand.
Based on 2.9% revenue growth, 16.4% operating margins, and a 17.3x exit multiple, the model projects PepsiCo reaching $168.60.
This implies a 13.3% total return and a 6.7% annualized return over the next 1.9 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for PEP stock:
1. Revenue Growth: 2.9%
Pepsi stock generated about $92 billion in LTM revenue, with growth slowing from 6% in 2023 as pricing gains normalized.
Recent quarterly revenue reached $24 billion, supported by resilient snacks demand and stable beverage volumes across core regions.
Growth remains constrained by mature categories, while international snacks and disciplined pricing support incremental expansion.
According to consensus analyst estimates, a 2.9% revenue growth assumption of Pepsi stock balances brand stability with softer global consumer spending.
2. Operating Margins: 16.4%
PEP stock reported operating margins near 15% LTM, improving from 14% in 2022 through pricing actions and tighter cost control.
Recent margins reflect easing input cost pressure and stable SG&A management across the portfolio.
Margin expansion is limited by promotions and logistics expenses, despite ongoing productivity efforts.
In line with analyst consensus projections, operating margins of 16.4% reflect normalized profitability without assuming aggressive efficiency gains.
3. Exit P/E Multiple: 17.3x
PEP stock trades near 17x earnings, consistent with its historical valuation during periods of stable cash generation.
Investor caution stems from slowing revenue growth and limited re-rating potential for mature consumer staples.
Strong cash flow and dividends support valuation, while growth constraints cap multiple expansion.
Based on street consensus estimates, a 17.3x exit multiple reflects balanced expectations and supports a roughly 7% annual return.
What Happens If Things Go Better or Worse?
PepsiCo’s outcomes depend on snack demand resilience, pricing discipline, and cost control, setting up a range of possible paths through 2029.
- Low Case: If demand softens and cost pressure persists, revenue grows around 2.7% with margins near 11.5% → 2.1% annualized return.
- Mid Case: With core brands executing steadily, revenue growth near 3.0% and margins improving toward 12.2% → 7.0% annualized return.
- High Case: If pricing holds and efficiency improves, revenue reaches about 3.3% and margins approach 12.7% → 11.1% annualized return.
The $194 mid-case target depends on steady execution across snacks and beverages, achievable without multiple expansion or sentiment-driven rerating.
How Much Upside Does It Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
