PepsiCo recently faced increased investor attention due to an activist proposal urging the company to address its use of flexible plastic packaging. This, along with the company's ongoing discussions about acquiring the soda brand Poppi, could have influenced its stock movements. Despite a strong earnings report and increased dividends, PepsiCo's stock was flat over the last quarter, diverging from broader market trends. Meanwhile, major indexes saw significant gains following the tariff pause announced by President Trump. However, PepsiCo's performance indicates resilience amidst evolving market dynamics and investor pressures.

Be aware that PepsiCo is showing 3 possible red flags in our investment analysis.

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The recent activist proposal and potential acquisition of Poppi could impact PepsiCo's long-term growth narrative, especially in terms of sustainability and product diversification. The focus on reducing flexible plastic usage aligns with increasing consumer demand for environmentally conscious practices, which might positively influence future revenue. However, the associated costs could put pressure on margins, influencing earnings forecasts. The proposed expansion through acquiring Poppi could bolster PepsiCo's beverage segment, enhancing its competitive edge and driving revenue growth.

Over the past five years, PepsiCo has delivered a total shareholder return of 24.75%, showcasing a steady increase in value despite the stock's more recent stagnation. During the past year, the company underperformed both the US market, which saw a 5.8% decline, and the US beverage industry, which experienced a 4.9% decline. This relative underperformance highlights challenges amid broader market movements.

The stock's current price aligns closely with the consensus price target of US$162.96, only 8.2% higher than the current US$149.67. This suggests analysts see the current trading price as reflecting fair value. Future revenue and earnings forecasts, assuming annual growth of 2.5% to 2028, may only justify the target if PepsiCo maintains current profitability ratios amidst economic volatility and capital allocation challenges.

Our expertly prepared valuation report PepsiCo implies its share price may be lower than expected.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NasdaqGS:PEP.

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