PepsiCo Trades Below 200-Day SMA: Buying Opportunity or Red Flag?

PepsiCo, Inc. PEP has encountered a notable resistance level, prompting caution among investors from a technical standpoint. PEP has been trading below the 200-day simple moving average (SMA) for quite some time now, which suggests a bearish trend.Closing at $149.94, PEP remains below its 200-day SMAs of $159.46, indicating a possible sustained downward trend.PEP Stock Trades Below 200-Day Moving AverageImage Source: Zacks Investment ResearchPepsiCo has shown a lackluster performance, with its shares plummeting 12.5% over the past year against the Zacks Beverages – Soft Drinks industry’s growth of 1.3%. It also shows an underperformance compared with the broader Zacks Consumer Staples sector and the S&P 500's respective growth of 2.8% and 7.7% in the same period.PEP’s performance is notably weaker than that of its close competitors, including The Coca-Cola Company KO, Monster Beverage MNST and Keurig Dr Pepper Inc’s KDP growth of 19.1%, 2.9% and 10.7%, respectively.PepsiCo’s One-Year Price PerformanceImage Source: Zacks Investment ResearchAt its current price, the PEP stock reflects an 18.2% discount from its 52-week high mark of $183.41. It also indicates a 6% premium with its 52-week low of $141.51.PepsiCo’s Estimate Revision TrendThe Zacks Consensus Estimate for PepsiCo’s 2025 and 2026 earnings per share has moved down by a penny, respectively, in the last 30 days.For 2025, the Zacks Consensus Estimate for PEP’s sales implies a 0.1% decline, and EPS suggests 1.6% year-over-year growth, respectively. The consensus mark for 2026 sales and earnings indicates 3.5% and 6.4% year-over-year growth, respectively.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Image Source: Zacks Investment ResearchWhy Are Investors Cautious About PEP?PepsiCo's challenges stem from weak top-line performance, driven by headwinds in its QFNA segment and struggles in the North American market. The QFNA segment, which includes brands like Quaker Oats, has been affected by product recalls due to contamination concerns, including Salmonella, leading to lower sales and profits in recent quarters.The North American convenient foods business has also faced weak demand, influenced by rising prices and ongoing product recalls. Additionally, business disruptions from escalating geopolitical tensions in certain international markets have weighed on revenue. PepsiCo’s aggressive price hikes in response to inflation have pressured volumes as consumers adjust their spending.Investor skepticism persists as these challenges continue. In the fourth quarter of 2024, revenues declined 0.2% year over year, with unit volume down 1% in both the convenient foods and beverage businesses. Foreign currency fluctuations further impacted revenues by 2%.PepsiCo’s pricing strategy and ongoing product recalls remain key concerns, particularly in North America. Higher prices have contributed to declining volumes, while contamination-related recalls in the QFNA segment have added further pressure on performance.Does PEP’s Valuation Discount Signal Buying Opportunity?PepsiCo is currently trading at a forward 12-month P/E ratio of 17.8X, below the industry average of 18.89X and the S&P 500’s average of 20.42X.PEP shares also trade at a discount to its competitors, including The Coca-Cola Company, Monster Beverage and Keurig Dr Pepper, with higher P/E multiples of 23.74X, 31.13X and 16.57X, respectively.Although the PEP stock’s valuation is currently lower than that of its industry peers, this gap might not be as advantageous as it appears. The lower price could signal underlying issues rather than presenting a straightforward investment opportunity. At this moment, its current valuation seems unwarranted. PepsiCo has a Value Score of D.Image Source: Zacks Investment ResearchPEP’s Investment StrategyInvesting in the PepsiCo stock requires a thoughtful strategy, especially given the company’s recent challenges in its North America operations and the broader market environment. Recent market data suggests bleak prospects for near-term recovery in its North America business.Trading at a discounted P/E, below the industry average, PEP may seem to offer a compelling value. However, its negative estimate revision trend and bearish technical indicators call for a cautious approach for new investors. Potential investors should consider waiting for clearer signs of recovery before investing in this Zacks Rank #4 (Sell) stock.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CocaCola Company (The) (KO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report Keurig Dr Pepper, Inc (KDP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks