Shares welcome a turning point after six weeks of falling? Goldman Sachs is betting on “ten years of growth” for Pepsi (PEP.US) and is optimistic about the resilience of leading consumers in the face of inflation

The Zhitong Finance App learned that Pepsi (PEP.US) is expected to reverse the trend of six consecutive weeks of falling stock prices. Although Goldman Sachs lowered its target price expectations for the American beverage, food, and snack consumer giant, it still maintained its most optimistic rating of “buy.” The improvement in sales and broad operating performance in the third quarter, as well as the potential for growth over the next ten years, provided support for optimistic expectations; at the same time, rising costs, pressure on profit margins, and continuing major challenges in beverage business execution are dragging down short-term profits.

By the close of the US stock market on Thursday, Pepsi's stock price had risen 3.73% to around 128 US dollars. The cumulative increase so far this week was nearly 2%, and the market value hovered around 175 billion US dollars. Pepsi's stock price has fallen by about 10% since this year. Based on Thursday's closing price, even if Goldman Sachs's latest price target is lowered, it still corresponds to a strong potential increase of about 28.6%.

Pepsi is entering a turning point where sales improvements and profit pressure are simultaneously under pressure. Organic sales increased by 3.1% in the third quarter, exceeding the market's consensus forecast of about 2.9%, and higher than 2.4% in the previous quarter; however, rising costs, poor product sales structure, and insufficient execution of the North American beverage business forced the company to unexpectedly lower its profit growth guidelines for the whole year.

The core contradiction revealed by Pepsi's latest quarterly earnings report on Thursday is that revenue growth has yet to be fully translated into profit growth: the company's third-quarter revenue was US$25.274 billion, up 5.6% year on year; core earnings per share were US$2.34, up 2% year on year, while core operating margin fell 35 basis points to 16.9%. The company narrowed the annual organic sales growth guide from 2% to 4% to about 3%, maintaining the midpoint of the original range, but lowered the fixed exchange rate core earnings per share growth rate from the lower end of the 4% to 6% range previously expected to 1% to 2%. This means that demand has recovered, but costs, marketing investment, and sales structures are draining profits from new revenue.

Pepsi is expected to end a six-week losing streak! Goldman Sachs lowered its target price, but is still optimistic about “ten years of growth” in the future

Goldman Sachs analyst Bonnie Herzog lowered Pepsi's price target from $180 to $165, but reiterated the “buy” recommendation. Compared to the closing price of the most recent trading day, this target price represents about 28% room for growth. Pepsi's organic sales increased by 3.1% in the third quarter, exceeding analysts' unanimous expectations of 2.9% and 2.4% in the previous quarter, sending a positive signal for the company's sales growth performance.

Goldman Sachs believes Pepsi is expected to achieve average single-digit organic sales growth over the next ten years. This long-term judgment indicates that the growth momentum is expected to increase further as the company gradually addresses current operating challenges.

Pepsi currently expects organic sales to increase by about 3% in the 2026 fiscal year, compared with the previous forecast range of 2% to 4%. Management also lowered the fixed exchange rate earnings per share growth forecast to 1% — 2%; the previous forecast range was 4% — 6%, and actual growth was expected to be close to the low end of the range.

During the third quarter results conference call, Pepsi Chief Financial Officer Stephen Schmidt said that the company is increasing investment to drive sales, but at the same time warns of rising costs. The chief financial officer said during the performance conference that the company is currently facing rising costs, an unfavorable product sales structure, and problems with business execution.

“The margin performance fell short of our expectations. Investment costs are rising, and the sales structure is particularly holding back.”

Pepsi plans to continue funding important business initiatives. Schmidt said that the company's advertising and marketing expenses in North America and international markets have increased.

Pepsi CEO Long Gard said that sales growth fell short of the company's initial expectations, reflecting a challenging consumer environment and inadequate commercial execution.

“Currently, we are not satisfied with the performance of the beverage business. As mentioned in our performance statement, we have strong competitiveness in some fields such as hydrating drinks and energy drinks, but our competitive performance in the carbonated soft drinks sector is poor. Therefore, we are focusing our business on improving the performance of carbonated soft drinks with a high sense of urgency.”

Pepsi is reviewing expenses across the organization, including headquarters management costs and centralized cost sharing. Longgaard said the savings will be used to support investments in the beverage business and the North American food business.

On the Stocktwits retail investor exchange platform, retail sentiment surrounding Pepsi shares declined from “extremely bullish” to “bullish.”

A retail trader said, “Start opening small positions today. I love the dividends on this stock.”

Another retail investor said, “Despite the current difficult environment, the company has achieved strong profits and medium to high single-digit revenue growth, yet the stock price has been sold off. This makes no sense at all. With tariffs and high energy prices driving revenue growth, how low can stock prices fall, and for how long? I don't know. All I can do is buy on dips.”

Sales recovery hits cost headwinds: Pepsi's stock price continues to rebound, waiting for profits to be realized

Goldman Sachs lowered its target price from $180 to $165, while maintaining a “buy” rating, judging that Pepsi is still expected to achieve average single-digit organic sales growth over the next ten years — the two latest judgments correspond to different time scales: short-term profit recovery is slower than expected, and long-term brand and channel value is still recognized.

For investors, Goldman Sachs's “buying” judgment is equivalent to the agency's comprehensive bet on brand restoration, overseas growth, and continued cash distribution; the key verification point driving the continuous revaluation of stock prices is still whether the North American business can be implemented along the path of “sales recovery - sales structure improvement - profit margin recovery”.

Apart from revenue growth that has yet to be fully translated into profit growth, the division within Pepsi's business is equally stark. Organic revenue from the international business increased by 8% in the third quarter, core operating profit increased 16%, and the core operating margin increased by 105 basis points; organic revenue from the North American food and beverage business declined slightly, and the profit margin of the North American food core operating margin decreased by 280 basis points. Overseas expansion supports the Group's growth, and the North American market still needs to restore consumers' willingness to buy and brand competitiveness at the same time. Therefore, Pepsi's investment value depends on whether international growth can continue and whether improved sales volume in North America can gradually reduce the drag on profit margins from promotion and marketing investment.

The most critical incremental information from Pepsi's performance call is that there is a delay in the release of cost pressure. Chief Financial Officer Stephen Schmidt explained that the company's procurement hedging usually covers 6-12 months, before buffering part of the cost increase; as these hedging matured one after another, higher investment costs began to flow into profit and loss. Meanwhile, the tariff refund support received by the North American beverage business in the third quarter will not be repeated in the fourth quarter, and profit margins will face additional pressure.

This significant change occurred against a backdrop where energy inflation is still prominent: the US CPI rose 0.4% month-on-month in August, up from 0.1% in July; energy prices rose 16.3% year over year. The rise in energy not only increases the transportation and production costs of food and beverage companies, but also squeezes consumers' budgets for snacks and beverages, making it difficult for companies to absorb costs through comprehensive price increases.

Management's response focuses on reducing headquarters and non-growth expenses and continuing to invest resources in brand, marketing, and sales execution. CEO Long Garde made it clear that the hydrating and energy drink business is performing well, and that carbonated soft drinks are underperforming in competition; brands such as Pepsi, Radon, and Poppi need to increase investment and improve terminal execution. The company cooperated with the Publisher Group to improve marketing returns through more detailed consumer data. The key to this business recovery is whether additional marketing expenses can lead to continuous repurchases, sales growth, and a better product structure. Only if these improvements significantly exceed the additional costs will the recovery in revenue translate into a sustainable return in profit margins.

Shareholder returns provide another support for the long-term investment logic. Pepsi maintains a full-year cash return plan of $8.9 billion, including $7.9 billion in dividends and $1 billion in repurchases. The company raised its annual dividend for the 54th year in a row in 2026. The current annualized dividend per share is 5.92 US dollars. Based on the closing price on October 8, the dividend rate is approximately 4.61%.