Investing

Could PEP Stock Drop 13% After Feb. 4?

Chris MacDonald

Published: February 4, 2025 1:47 pm

What a crazy start to the week it’s been for most companies. After investors collectively freaked out over newly-imposed 25% tariffs on America’s neighbors (and China, to a lesser degree), cooler heads do seem to have prevailed. President Trump has announced that a one-month pause on tariffs for both Canada and Mexico will be put in place, allowing many blue-chip stocks to see recoveries this week.

However, as investors also may be well aware, it’s earnings week. As such, PepsiCo (NASDAQ:PEP) is among the most important companies to report, with its earnings set to be released on February 4.

This is a company that’s seen a decline of around 25% since early 2023, which is quite rare for the consumer staples giant. Historically, similar pullbacks have led to new highs, and with no fundamental business changes, its long-term potential remains intact.

According to some analyst price targets, PEP stock could drop 13% after its February 4 earnings report. Let’s dive into what investors may want to make of the bearish narrative around Pepsi, and if warnings of further downside from here may be worth heeding.

Key Points About This Article:

• Pepsi is one of this week’s star companies set to report, and investors are bracing for what could be big volatility following this print.
• Let’s dive into what analysts expect from the beverage and snack giant, and where this stock could be headed from here.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

What Wall Street Analysts Expect

Pepsi’s upcoming Q4 2024 earnings report is set to be released on February 4, to great fanfare. The beverage and snack giant remains a household favorite among consumers and investors alike due to the company’s impressive dividend yield and strong long-term earnings growth.

Analysts are now projecting the consumer discretionary giant will bring In $1.95 of EPS this coming quarter and total revenue of $27.89 billion. This reflects a moderate growth outlook, with overall earnings expected to increase by 4.42% year-over-year, which could bring full-year EPS from $8.15 to $8.51.

Long-term projections suggest steady financial growth, with analysts anticipating an 8.5% annual earnings increase and a 4.1% rise in annual revenue. These figures indicate sustained expansion despite near-term market fluctuations. However, some remain cautious around this particular company given its current multiple of more than 22-times, which is hefty relative to this sector average.

The thing is, Pepsi’s world-class brand and overall growth trajectory remains positive, supported by stable revenue streams and strong long-term earnings growth. Investors will be watching closely to see whether the upcoming report meets expectations and whether guidance for 2025 aligns with these optimistic forecasts. 

2025 Catalysts to Watch

Pepsi is set for a transformative 2025, with several key growth catalysts expected to enhance its market position. Strategic acquisitions play a significant role, with the full acquisition of Sabra and Obela strengthening PepsiCo’s presence in the growing dips and spreads market. The company is also expanding into plant-based beverages and functional health drinks, tapping into rising demand for healthier alternatives.

Productivity improvements and cost optimization remain priorities, with investments in AI-driven inventory management, robotics, and predictive analytics aimed at enhancing supply chain efficiency. These initiatives could boost profit margins while reducing operational costs. Additionally, brand innovation continues to be a focal point, with PepsiCo developing lower-calorie and functional beverages and advancing its sustainable packaging goals. By 2025, the company aims to make 100% of its packaging recyclable, compostable, or reusable, aligning with consumer demand for eco-friendly products.

I think Pepsi is a company that could certainly benefit from a widespread investor pivot toward more defensive names, particularly in this relatively overheated market. Given how much uncertainty we’re seeing unfold in the market, I wouldn’t be surprised to see companies that are viewed as defensive options surge in value over the course of 2025. 

Where Is Pepsi Headed From Here?

There’s certainly plenty of criticism to go around for companies like Pepsi, particularly with a new Trump administration focusing on reducing sodium, sugar, fat, and artificial colors for the American public. From a financials standpoint, there are also concerns analysts have pointed out about the potential for slowing growth over the long-term, outside of key acquisitions that may need to happen to bolster growth.

The thing is, I think Pepsi’s world-class brand and its devoted customer base should continue to put a floor under growth. And unless everyone starts taking GLP-1 drugs overnight, this is a company that should benefit from the average consumer looking for an affordable treat now and again.

This coming earnings report could certainly provide volatility. But in my view, PEP stock is one to own long-term, so if there is a significant decline, this is a company I’ll be looking to add on any major dip here.