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News

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News

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Asset Watch

Is PepsiCo about to pop?

 

Tuesday, February 14, 2023

With the U.S. Consumer Price Index (CPI) scheduled for release on Feb. 14, volatility could be amplified as the stock, bond, commodity and FX markets react to the data. And while information technology, consumer discretionary and communication services have led the S&P 500’s year-to-date (YTD) rally, those sectors could suffer if interest rates move materially higher.
In contrast, consumer staples are one of three sectors down YTD, and it could benefit from a rotation. Meaning PepsiCo may offer a solid risk-reward proposition in the weeks ahead.
For starters, the beverage & snack giant outperformed analysts’ fourth-quarter earnings estimates on Feb. 9. So much so that CEO Ramon L. Laguarta said, “We feel comfortable with the way the business is going, as you could tell from Q4, [with] good momentum in our brands and good share momentum in many geographies around the world.”
Pepsico Stock Chart Trading View

Then the technical backdrop is constructive. The upward slowing grey line shows PepsiCo has bounced off monthly support, and prior iterations resulted in solid rallies.

Additionally, PepsiCo closed above its 200-day moving average on Feb. 10, and the last five times this occurred, four major rallies followed, while one trough-to-peak rally of 7.6% was present in May.

If history is any indication, more upside should be on the horizon. PepsiCo is also a great mean-reversion play when considering the YTD underperformance.

So, does the stock have all the ingredients for another upswing, or will the CPI sour the mood on Wall Street?


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