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Asset Watch
Thursday, December 5, 2024
While retail stocks benefited from the Black Friday boon, investors have little appetite for consumer-packaged goods companies like PepsiCo. However, with shares down from their all-time highs, and the fundamentals signalling solid earnings, could PepsiCo be the perfect appetiser to add to your portfolio?
Though categories like apparel, electronics, and toys generate the most attention during the holiday shopping season, Fiserv reported that grocery was the fastest-growing retail category last month, with sales up 11.1% year-over-year (YoY).
“Holiday sales are critical for small businesses, with restaurants and retailers in particular benefitting from consumers getting out and patronizing local establishments during the final months of the year,” said Prasanna Dhore, Chief Data Officer at Fiserv. “Notably in November, food sales accelerated across both restaurant and grocery while retail maintained the positive momentum from October, a significant increase when compared to 2023.”
As a result, PepsiCo should see a sales bump from the celebrations.
Despite sinking below $160 seven times intramonth since late 2021, PepsiCo closed each month above the key level. The pattern emerged in November, with the stock hitting an intramonth low of $155.85 before closing the month at $163.41.
So, the downside could be limited in the weeks ahead.
Another interesting development is that all seven intramonth dips below $160 since late 2021 culminated with PepsiCo surpassing $174 within three months. The milestone occurred the following month most of the time and the longest wait was three months, which happened once.
Consequently, PepsiCo could offer solid value in the low $160s.
With the stock recently consolidating between roughly $161 and $163, a limited downside may make PepsiCo an attractive trade. Given that higher lows have materialised over the last several days, it may have already bottomed.
Therefore, a rally toward $174 could be the most likely outcome in December.
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