Is PepsiCo (PEP) a Buy After a Year of Volatility and Activist Pressure?

The past year has been a rollercoaster for PepsiCo (PEP), with its stock price oscillating between optimism and pessimism amid shifting consumer preferences, margin pressures, and, most recently, a high-stakes activist campaign. Elliott Investment Management’s $4 billion stake—announced in early September 2025—has thrust the company into the spotlight, reigniting debates about its value proposition. For value investors, the question is whether this activist intervention, coupled with PepsiCo’s current valuation, signals an opportunity to capitalize on undervaluation or a cautionary tale of overhyped catalysts.

Activist Catalysts: Refranchising, Streamlining, and Shareholder Gains

Elliott’s entry into PepsiCo marks one of the most significant activist campaigns in the beverage and snack industry. The firm has outlined a three-pronged strategy: refranchising PepsiCo Beverages North America’s bottling network, streamlining its brand portfolio, and divesting non-core assets [1]. These moves aim to address what Elliott describes as “underperformance” in PepsiCo’s beverage segment and margin compression in its food business [2]. By refranchising its bottling operations—mirroring Coca-Cola’s more efficient model—Elliott estimates PepsiCo could unlock $5 billion in value through cost savings and operational efficiency [1].

Historical data from Elliott’s campaigns since 2024 offers a compelling precedent. On average, its activist campaigns have driven a 25% stock price increase within six months [1]. Applying this track record to PepsiCo, which closed at $141.72 on September 8, 2025, suggests a potential rise to $190—a 34% upside. This projection hinges on Elliott’s ability to execute its agenda, but the firm’s reputation for disciplined capital allocation and strategic clarity lends credibility to its vision [3].

Value Investing Lens: Modest Undervaluation or Mispricing?

From a value investing perspective, PepsiCo’s current valuation appears modestly undervalued. The company trades at a forward price-to-earnings (P/E) ratio of 17.53, below its five-year average of 21.2, and its GF Value—a proprietary metric combining earnings, cash flow, and balance sheet strength—is $173.4, implying a 22% discount to the current price [4]. These metrics suggest that the market has priced in pessimism about PepsiCo’s growth trajectory, particularly in its North American food and beverage segments.

However, value investors must weigh this against structural challenges. PepsiCo’s operating margins have contracted over the past two years due to inflationary pressures and supply chain bottlenecks [3]. While Elliott’s proposed cost-cutting measures could reverse this trend, the company’s reliance on legacy brands like Frito-Lay and Gatorade also exposes it to shifting consumer preferences toward healthier options. PepsiCo’s recent foray into protein and probiotics is a step in the right direction, but execution risks remain [4].

Risks and Realities: Can PepsiCo Deliver?

The activist playbook is not without risks. Elliott’s success depends on PepsiCo’s willingness to embrace disruptive changes, such as refranchising its bottling network—a move that could face resistance from internal stakeholders and bottlers. Moreover, the company’s commitment to its existing strategy—focused on innovation and international expansion—could dilute the impact of Elliott’s proposals [4].

Market conditions also pose headwinds. PepsiCo’s stock has underperformed the S&P 500 by 4.01% in 2025, reflecting broader concerns about consumer spending in a high-interest-rate environment [2]. While Elliott’s campaign has injected short-term volatility, with PEP dropping from $150.28 on September 2 to $141.72 by September 8, the stock’s 52-week range ($127.60–$179.43) suggests it remains within a familiar trading band [2]. This stability could appeal to risk-averse investors but may also indicate limited upside if Elliott’s proposals fail to materialize.

Conclusion: A Calculated Bet for Patient Investors

PepsiCo’s stock is neither a slam-dunk buy nor a clear sell. For value investors, the combination of a modestly undervalued stock and a credible activist catalyst creates a compelling case for a long position, particularly if Elliott’s proposals gain board approval. However, the execution risks—both operational and strategic—demand a cautious approach. A disciplined investor might consider a small position with a stop-loss below $130, while reserving a larger allocation for clearer signs of progress in Q4 2025 earnings reports.

In the end, PepsiCo’s story is a microcosm of the broader debate about activist investing: Can short-term interventions unlock long-term value, or do they merely paper over deeper structural issues? For now, the answer lies in the execution of Elliott’s plan—and the patience of those willing to bet on it.

**Source:[1] PepsiCo Stock To $190? [https://www.forbes.com/sites/greatspeculations/2025/09/03/pepsico-pep-stock-to-190/][2] PepsiCo, Inc. (PEP) Stock Historical Prices & Data [https://finance.yahoo.com/quote/PEP/history/][3] Elliott Sends Presentation to Board of Directors of PepsiCo Inc [https://www.prnewswire.com/news-releases/elliott-sends-presentation-to-board-of-directors-of-pepsico-inc-302543745.html][4] PepsiCo Showcases Emerging Market Growth [https://www.nasdaq.com/articles/pepsico-showcases-emerging-market-growth-sustainable-or-cyclical]