-
The company’s plan to trim its portfolio of brands should be a catalyst for the stock.
-
The decision to shed some lagging labels shows PepsiCo is listening to an activist investor.
-
A renewed emphasis on customer and shareholder value could also result in share price gains.
-
10 stocks we like better than PepsiCo ›
Sometimes less is more and addition is done through subtraction. PepsiCo (NASDAQ:PEP) is assuming those facts.
Among other initiatives aimed at creating shareholder value, the beverage giant announced Tuesday that it will eliminate nearly 20% of the products from its portfolio by early 2026. That’s not necessarily a bad thing because it’s not a stretch to say the portfolio has become too extensive.
That news resulted in endorsement from a sell-side analyst: J.MorganAndrea Teixeira upgraded her opinion on consumer staples stocks from neutral to overweight and increased her price target from $151 to $164, implying a 10.2% upside from its closing price last Wednesday. Analyst updates may act as good sparks in the short term, but the good news for PepsiCo shareholders is that the stock could be a catalyst-rich idea by 2026.
While PepsiCo did not explicitly say it is reducing its lineup of brands at the urging of activist investor Elliott Investment Management, the move shows the company is willing to listen and engage in constructive dialogue. Elliott applauded Pepsi’s effort and broader plans, noting that greater innovation and a greater focus on costs could be a catalyst for profit and sales growth.
The point is that some companies clash with activist firms, engaging them in protracted and unproductive battles that result in little stock price appreciation. For now, the relationship between Elliott and Pepsi seems more pleasant, and it’s worth recognizing that going into 2026 because it shows that the soft drink maker is open to the company’s ideas. He previously floated the idea of Pepsi divesting its North American bottling operations. Maybe that will happen. Doing so would provide a clear tailwind to the stock. Maybe it won’t happen, but the thing is, Pepsi is listening.
As for which brands the Ruffles maker is considering eliminating, it didn’t elaborate, but it has 60 top brands to choose from, and a 20% target suggests 12 are heading out the door. That reorganization could be valuable in terms of cutting operating expenses while increasing operating margins. Other benefits of eliminating lagging brands include paving the way for Pepsi to launch compelling new products while also innovating more with labels that consumers respond to.