Street Calls of the Week: Upgrades for Pepsi, Riot Platforms

investing.com:

Investing.com — Here is your Pro Recap of the top takeaways from Wall Street analysts for the past week: upgrades for PepsiCo, Riot Platforms and Kingsoft Cloud; downgrade for Nuscale Power .

InvestingPro subscribers always get first dibs on market-moving rating changes.

What happened? On Monday, Morgan Stanley upgraded PepsiCo (NASDAQ:PEP) to Overweight with a $190 price target.

What’s the full story? Morgan Stanley wrote that with PEP’s valuation at a 22-year low and more than three standard deviations below its relative NTM 10-year P/E average, a fundamental inflection should drive stock outperformance. This comes after PEP’s stock underperformed peers by 1,900 basis points since Q2 EPS. The bank is essentially in-line with consensus on Q1, viewing their Q1 forecast as conservative, so upside is more likely than downside.

The analysts expect the market to start looking ahead to a post Q1 inflection that is clearly on the horizon from their vantage point. For context, post Q2 of 2023 EPS, they downgraded Pepsi’s stock to an EW, concerned that valuation was priced to perfection and consensus/PEP guidance on OSG was clearly too high with an unrealistic volume rebound as pricing dissipated. Both of these issues have now played out.

Morgan Stanley wrote they would be aggressive buyers here ahead of a powerful inflection in H2 after PEP bottoms fundamentally in Q1, and returns to above consensus and peer OSG. They believe PEP’s valuation compression is overdone.

Overweight at Morgan Stanley means “The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.”

How did the stock react? PepsiCo