Why PepsiCo Stock Lost Its Fizz on Friday

PepsiCo (PEP) The stock has seen a notable decline through the weekend, falling more than 2% in a day in which S&P 500 the index is only marginally a part of dipped. The curious beverage and snack giant might have fared better had it not been for the news of a prominent researcher’s demotion recommendation.

From purchase to storage

Long before the market opened that day, Morgan Stanley analyst Dara Mohsenian made that dramatic change. He now considers PepsiCo stock worthy only of an equal (read: hold) designation; previously rated the company as overweight (buy). Still, he maintained his price target of $185 per share, which is not far from the less than $172 it most recently closed at.

In his research note detailing the change, Mohsenian cited a soft market for PepsiCo products in the company’s native US. This despite the company’s increased spending on marketing efforts such as promotions.

The forecaster singled out the company’s large Frito-Lay North America ( FLNA ) as a particularly struggling unit. “As weakness in organic FLNA sales growth has persisted, pricing interventions/higher spend do not appear to be driving significant snack payback, and beverage market share trends have worsened, along with moderating, though still solid, sales growth international organics as price contribution slows. sequentially,” he wrote.

It’s not easy being in this business

PepsiCo faces two tough factors here. The first is that they operate in tough, highly competitive segments full of well-capitalized rivals. Second, its fairly traditional snack and beverage offerings are somewhat dated given the increased health consciousness of the American public. To convince investors and pundits more excited about its prospects, it probably needs a stronger and more viable market strategy.