PepsiCo is on course to take over as the biggest US beverage company by market value, supplanting rival Coca-Cola, which has held the spot largely uninterrupted for the better part of two decades.
That’s according to Wall Street analysts including Kaumil Gajrawala at Jefferies, who has initiated coverage of PepsiCo with a buy rating, calling it the sector’s “most durable business.” He projects the shares will rise more than 20% over the next year to $203, for a market value of about $279 billion. That would top the roughly $277 billion market capitalization implied by his $64 target for Coca-Cola, which he rates a hold.
The call, echoed by analysts from Cowen and Goldman Sachs Group Inc., would mark a telling reversal for the soda giants: Aside from a single day in 2020, PepsiCo’s value hasn’t eclipsed Coca-Cola’s since 2006. At roughly $246 billion on Monday, Coca-Cola’s market cap is nearly $15 billion above PepsiCo’s.
Coca-Cola has long held down the top spot in part due to its strong brand portfolio and record of sales growth. But PepsiCo’s food business, including Lay’s potato chips, Doritos and Quaker oatmeal, has become a key differentiator. Gajrawala expects PepsiCo’s Frito-Lay North America business will continue to outperform its other products. Meanwhile, Coca-Cola is exclusively a beverage company.
For PepsiCo, “hefty investments over the last half decade are yielding results, and we expect returns to accelerate,” Gajrawala wrote in a note to clients, highlighting that the company has invested about $60 billion over the past five years to make operations more efficient, increase capacity and build its brand.
The analyst touted PepsiCo’s ability to grow during challenging economic periods, like in the aftermath of the pandemic. He sees it as the most likely company in his beverage and household products coverage to grow earnings in a range of high-single digits or better over the next three years.
Meanwhile, he see limited room for Coca-Cola to advance at its current valuation. A tax dispute with the Internal Revenue Service also clouds its outlook.
Read more: Coca-Cola Appeal of $882 Million Tax Ruling Poses Challenges
Coca-Cola is hardly falling out of favor on Wall Street, and by one measure is the preferred stock. Its consensus rating — a proxy for the ratio of buy, hold and sell recommendations — is 4.6 out of five, data compiled by Bloomberg show. PepsiCo’s is 4.1 out of five.
Both stocks have trailed the S&P 500 Consumer Staples Index this year. PepsiCo has slumped around 7%, while Coca-Cola has dropped about 10%. Both touched one-year lows in October amidworriesthat people taking so-called GLP-1 drugs — a class of medicines used to treat diabetes and obesity — will cut back on indulgences.
FAQs
Coca-Cola risks being unseated as the highest-valued beverage company after a dominant 17-year run at the top, analyst says. PepsiCo is on course to take over as the biggest US beverage company by market value, supplanting rival Coca-Cola, which has held the spot largely uninterrupted for the better part of two decades ...
What are Coca-Cola risks? ›
“Regular consumption of these ingredients in the high quantities you find in co*ke and other processed foods and drinks can lead to higher blood pressure, heart disease, diabetes, and obesity.
What is Coca-Cola's biggest problem? ›
Operating on that scale creates a big carbon footprint. The company uses over 200,000 vehicles to distribute its products every day and runs hundreds of bottling plants and syrup factories across the globe. But co*ke's single largest contribution to climate change comes from its refrigeration equipment.
What are the negative points of Coca-Cola Company? ›
Coca-Cola is rich in sugar, especially sucrose, which causes dental caries when consumed regularly. Besides this, the high caloric value contributes to obesity. Both are major health issues in the developed world.
What are the strategic problems faced by co*ke? ›
The problems faced by Coca-Cola Company are high sugar harmful to health, increase in competitors, plastic bottle waste and water scarcity. These issues will lead to many negative impacts to social and natural environment.
What is the risk rating of Coca-Cola? ›
Industry Comparison
| Company | ESG Risk Rating | Industry Rank |
|---|
| Keurig Dr Pepper, Inc. | 23.7 Medium | 77 out of 646 |
| The Coca-Cola Co. | 24.2 Medium | 82 out of 646 |
| Nongfu Spring Co., Ltd. | 25.2 Medium | 101 out of 646 |
| Monster Beverage Corp. | 32.8 High | 319 out of 646 |
1 more rowMay 28, 2024
Legal challenges: The Coca-Cola Company has faced various legal challenges related to marketing practices, product labeling, and workplace discrimination over the years. Competition: Coca-Cola faces intense competition in the beverage industry from other large multinational companies as well as smaller regional brands.
What are the reputation issues with Coca-Cola? ›
The company has therefore been marked down in our rating system in a number of categories, including: climate change, habitats & resources, palm oil, pollution and toxics, human rights, workers' rights, irresponsible marketing, animal rights, controversial technologies, anti-social finance and political activities.
Why is Coca-Cola banned in some countries? ›
The main reason for the Coca-Cola ban
The reason is mainly ideological, which manifests itself in trade embargoes or sanctions. The North Korean dictatorship officially restricts access to this drink, although it is likely that it has crossed the country's borders.
What are the regulatory issues with Coca-Cola? ›
Coca-Cola has faced regulatory scrutiny in the past 5 years. The company has been accused of misleading and deceptive advertising practices regarding the consumption of sugar-sweetened beverages, including claims that these beverages are not linked to obesity, diabetes, and cardiovascular disease .
The clearest strategic risk for co*ke is that it's commitment to ocean recycling increases, rather than decreases, its overall cost of plastic.
What are Coca-Cola ethical crises? ›
The key ethical scandals of the Coca-Cola company with respect to its stakeholders has been found to involve plastic waste (pollution), channel stuffing, depletion of water resources, racial discrimination, impact on health, disputes with distributors, and contamination scare.
What was the crisis faced by Coca-Cola? ›
The fundamental challenge faced by Coca-Cola was the misalignment between consumer preferences, market research data, and the emotional attachment consumers had with the original brand, showcasing the intricate interplay between innovation and brand loyalty.
What are the dangers of consuming Coca-Cola? ›
Even one or two colas a day could increase your risk of type 2 diabetes by more than 20%. Sugar intake is linked to high blood pressure, high cholesterol, and excess fat, all of which increase the risk of heart disease. Colas and other sugary drinks have been linked to an increased risk of pancreatic cancer.
How much co*ke Zero is safe to drink in a day? ›
Your allowable daily intake is considered by health authorities to be 11mg per kg body weight a day. A person of 80kg could take 800mg without it affecting their health; so every Coca-Cola Zero has 60mg per can.
What is the healthiest soda? ›
What is the healthiest soda? Sorry, but there isn't really a healthy soda out there. All of them have added sugars or artificial sweeteners, Gentile says.
What is the risk of KO stock? ›
The Coca-Cola Company shows a Risk Score of 9.00.
