Investment Thesis for PepsiCo, Inc. (NYSE: PEP)

Abstract

PepsiCo, Inc. (NYSE: PEP) is a global food and beverages company, most commonly known by its famous brands such as Pepsi-Cola and Frito-Lay. Using historical performance data, we have determined through a Probabilistic Discounted Cash Flow (P-DCF) analysis and Monte Carlo simulations that the company is fundamentally worth $81.25/share. Despite PepsiCo’s cost-cutting efforts and reorientation of business to accommodate the shift of consumer preferences towards healthier and more eco-friendly food, the macroeconomic and political instability in PepsiCo’s emerging market segments, as well as the company’s high debt levels lead us to conclude that PepsiCo does not have the revenue generating potential to justify the current market price. For all the reasons above, we rate PepsiCo a SELL.