3 Reasons to Sell PEP and 1 Stock to Buy Instead

Since December 2025, PepsiCo has been in a holding pattern, posting a small loss of 4.1% while floating around $142.12. The stock also fell short of the S&P 500’s 8.9% gain during that period.

Is there a buying opportunity in PepsiCo, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is PepsiCo Not Exciting?

We don’t have much confidence in PepsiCo. Here are three reasons why there are better opportunities than PEP, plus one stock we’d rather own.

1. Demand Slipping as Sales Volumes Decline

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

PepsiCo’s average quarterly sales volumes have shrunk by 1.8% over the last two years. This decrease isn’t ideal because the quantity demanded for consumer staples products is typically stable.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect PepsiCo’s revenue to rise by 4.3%. While this projection implies its newer products will spur better top-line performance, it is still below average for the sector.

3. Shrinking Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Looking at the trend in its profitability, PepsiCo’s operating margin decreased by 1.2 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 12.7%.

Final Judgment

PepsiCo isn’t a terrible business, but it doesn’t pass our bar. With its shares trailing the market in recent months, the stock trades at 16.1× forward P/E (or $142.12 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a dominant aerospace business that has perfected its M&A strategy.

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