By Angela Palumbo
PepsiCo stock was rising Monday after a Morgan Stanley analyst upgraded shares of the beverage maker on the belief that it is a solid long-term investment with room for upside from here.
Morgan Stanley analyst Dara Mohsenian upgraded shares of PepsiCo to Overweight from Equal Weight with a $190 price target. Mohsenian also named Pepsi as his overall top stock pick.
“We would be aggressive buyers here ahead of a powerful inflection in H2 [second half of the year] after PEP bottoms fundamentally in Q1,” Mohsenian wrote in a research note Monday.
Shares of PepsiCo were rising 4% to $171.26 on Monday, which would be the stock’s largest percentage increase since Oct. 12, 2022, according to Dow Jones Market Data. The stock has gained 0.9% this year.
Shares of competitor Coca-Cola were up 0.6% while Mondelez International rose 1% and Conagra Brands gained 0.4%. The S&P 500 was up 0.9%.
Mohsenian’s upgrade comes after the stock dropped 6% in 2023. Shares have been pressured by weakening consumer sentiment and concerns that the popularity of weight loss drugs would hit demand for snack foods and sugary drinks.
PepsiCo also posted a surprise drop in revenue for its fourth quarter from the prior year in February. Management attributed much of this to increased prices.
However, Mohsenian says he believes results are about to unexpectedly inflect after the first quarter “and investors should look ahead.”
“International results are inflecting at PEP, with robust category growth, strong PEP market share performance, and greater scale driving outsized recent margin expansion,” he added.
PepsiCo was a December 2023 Barron’s stock pick .
Write to Angela Palumbo at angela.palumbo@dowjones.com