Should You Invest in Pepsi?

OVERVIEW

PepsiCo Incorporation is a company based in the United States. The company operates a food and beverage company. The company designs, manufactures, and distributes food and drinks around the world. The company operates under the Frito Lay, Pepsi, and Quaker Oats. The company manufactures Pepsi and Gatorade products and a variety of chips and other offerings. The company was founded in 1898.

Why You Should?

  1. PepsiCo is a great reopening play in an investor’s portfolio. The COVID-19 pandemic has decimated the demand for some of PepsiCo’s products as restaurants and other large venues shut down due to the impacts of the pandemic. This has hurt some aspects of the company’s sales and will continue until people are comfortable to go out once again.
  2. PepsiCo operates an extremely diverse business. The company owns and operates under several of the world's most recognizable brands, like Pepsi, Frito Lay, and Gatorade (among others). This has benefited the company’s sales in the past and will continue to drive the company’s sales in the future. This will also help the company go through tough times of demand for some of its sectors. This will benefit the company and its investors.
  3. PepsiCo operates extremely strong businesses as well. For example, during this pandemic, the company was able to keep up with the sky-high demand as people stock-piled during the pandemic. These brands continue to see steady growth as well. This business and brand strength has benefited the company’s sales and operations in the past and will also benefit investors.
  4. Some impacts of the COVID-19 pandemic have actually benefited the company goes through these tough times. During the start of the pandemic, the company was benefited as people stocked up on non-perishable food and beverage products (like the ones that Pepsi offers). The company looks to maintain strong growth in the future, something that will benefit both Pepsi and its investors.
  5. Pepsi has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company maintain its strong growth and operating strategies. Furthermore, this revenue and profit growth will also benefit investors in the company. In the financial year of 2020, the company reported revenues of around 70.37 billion and profits of around 7.12 billion. Both of these metrics are higher than what the company in the financial year of 2019 when the company had revenues of around 67.16 billion and slightly higher profits of around 7.31 billion.

Why You Should Not?

  1. The COVID-19 pandemic has decimated the demand for some of Pepsi’s commercial offerings as restaurants and large venues that place bulk orders for the company’s products. This has hurt the company and will continue to stain the company’s results until these venues open again and people go out of their homes.
  2. Pepsi faces tough competition in the food and beverage industry. Besides competition from small business food and beverage producers, other large companies like Coca-Cola, Keurig Doctor Pepper, and other in-store brands like Costco’s Kirkland Signature and Walmart’s Great Value. This competition might hurt the company in the future and might also hurt investors in the company.

MY OPINION

I think that PepsiCo is a great long-term investment in an investor’s portfolio due to its position as a good reopening play, a diverse set of businesses, strong brands and product lines, positive impacts from the COVID-19 pandemic, as well as rising revenues and profits. However, negative impacts from the pandemic and tough competition might hurt the company and its investors in the future.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.