Key Takeaways:
- Outlook Reaffirmed: Pepsi affirmed its 2026 outlook after reporting Q4 revenue of $29B and core EPS of $2.
- Capital Returns Reset: Pepsi raised its annualized dividend 4% to $6 and authorized up to $10B of repurchases through 2030.
- Price Target Framework: Pepsi stock could reach $192 by 2028 as the model reflects 4% revenue growth, 17% operating margins, and a 17x exit multiple.
- Modeled Upside Math: Pepsi’s $192 target implies 15% upside from the current $166 price, translating into a 5% annualized return through 2028.
Pepsi (PEP) is a global food-and-beverage supplier spanning 6 segments, selling snacks, packaged foods, and drinks across retail and foodservice channels.
With $94B in revenue and $51B in gross profit last year, PepsiCo’s scale matters because shelf access and distribution density shape category share in mature U.S. aisles and faster-growing international markets.
Pepsi ran $36B of operating expenses and produced $15B of operating income, sustaining a 16% operating margin despite slower top-line momentum.
In the fourth quarter of 2025, PepsiCo delivered $29B of net revenue and $2 of core EPS, reaffirmed its 2026 financial outlook, and highlighted a 1 point foreign-exchange tailwind expected to support reported revenue and earnings growth.
“We’re playing offense here,” Chief Financial Officer Steve Schmitt said on PepsiCo’s Q4 2025 earnings call, referring to accelerated affordability investments funded by productivity gains rather than margin sacrifice.
Furthermore, management is accelerating affordability initiatives in 2026, pairing price investment in Frito-Lay with double-digit shelf-space gains during spring resets to protect volume while funding reinvestment through productivity and rightsizing.
PepsiCo also increased its annualized dividend by 4% to $6 and authorized a $10B share repurchase program through 2030.
The central valuation question is whether a $192 model value by 2028, anchored to a 17x exit multiple, adequately compensates investors for a 5% annualized return profile given PepsiCo’s mature growth outlook.
What the Model Says for PEP Stock
Pepsi’s scale, entrenched snack franchises, and asset-intensive distribution system support steady cash flows, while forward P/E near 17x and free cash flow yields around 4–5% signal limited scope for valuation or margin expansion.
The model applies 3.8% revenue growth, 16.8% operating margins, and a 17.3x exit multiple, which aligns with recent trading ranges and produces a $191.79 target price.
That target equates to 15.2% total upside from $166.47 and a 5.0% annualized return, consistent with dividend-anchored returns rather than capital appreciation.
Based on these modeled outcomes and prevailing valuation multiples, the valuation model signals a Sell for Pepsi stock.
With a modeled 5.0% annualized return below a typical 10% equity hurdle, the valuation prioritizes capital preservation over appreciation, indicating inadequate risk-adjusted compensation and justifying a Sell under disciplined capital allocation logic.
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 Pepsi stock:
1. Revenue Growth: 3.8%
Pepsi stock’s revenue base reflects a mature global food and beverage portfolio, where brand scale and category penetration have historically limited organic growth despite pricing actions and product mix support.
In fourth-quarter 2025, revenue increased 2% year over year, driven by Frito-Lay affordability initiatives, resilient international snack demand, and incremental contributions from brands integrated during 2025.
Maintaining a 3.8% growth trajectory depends on sustained volume stabilization and pricing discipline, while softer consumer demand or weaker shelf execution would pressure growth quickly given low structural elasticity.
Revenue growth exceeds the 1-year historical rate of 2%, and the model assumes moderate acceleration within a mature business profile.
2. Operating Margins: 16.8%
Pepsi stock’s operating margin history reflects disciplined cost control within an asset-heavy distribution system, where logistics, labor, and marketing limit structural margin expansion.
Current margins near 16% benefit from productivity programs and rightsizing, offsetting slower revenue growth and higher reinvestment tied to pricing and innovation initiatives.
Maintaining 16.8% margins depends on execution discipline, as higher promotional intensity or cost inflation reduces operating leverage quickly at this scale.
This exceeds the 1-year historical operating margin of 16%, and the model assumes incremental efficiency gains rather than structural change.
3. Exit P/E Multiple: 17.3x
The exit P/E multiple capitalizes terminal earnings for a mature consumer staples business with stable cash generation, limited growth optionality, and predictable reinvestment needs.
The model already embeds modest revenue acceleration and margin expansion, leaving the multiple to reflect sustainability rather than additional optimism.
While the market prices Pepsi stock near a 19x NTM P/E, a 17.3x exit multiple reflects slower organic growth, affordability-led reinvestment, disciplined capital returns, and limited re-rating potential after 2025 brand integrations and productivity-driven margin gains.
The exit multiple matches the 1-year historical P/E of 17x, and the model assumes valuation stability rather than multiple expansion.
What Happens If Things Go Better or Worse?
Pepsi stock paths depend on snack demand elasticity, pricing discipline, and productivity execution, setting a range of possibilities through 2030.
- Low Case: If affordability fades, volumes stall, revenue grows 2.4% and margins hold 11.8% with valuation compression → 0.9% return.
- Mid Case: With brands steady, costs controlled, revenue grows 2.7% margins reach 12.5% valuation stable → 4.8% return.
- High Case: If innovation and productivity outperform, revenue reaches 3.0% and margins approach 13.1% with easing valuation → 8.0% return.
How Much Upside Does Pepsi Stock 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!
