PepsiCo Surges 2.8% on Cost-Cutting Pledge and JPMorgan Upgrade: Is This the Start of a Bullish Rebound?

Summary
• PepsiCo (PEP) surges 2.8% intraday to $148.72, outperforming the flat non-alcoholic beverages sector.
• JPMorgan upgrades PEP to Overweight with a $164 price target, citing productivity gains and innovation.
• Company announces 20% SKU reduction and $1B+ annual cost savings by 2026.
• Options volume spikes 300% as traders bet on volatility ahead of December 19 expiration.

PepsiCo’s stock is surging on a dual catalyst: activist-driven cost-cutting measures and a bullish JPMorgan upgrade. With the stock trading near its 52-week low, the market is pricing in a potential turnaround as the company slashes underperforming products and streamlines operations. The intraday move reflects renewed confidence in management’s ability to boost margins and shareholder returns.

Cost-Cutting and Product Rationalization Drive PEP’s Rally
PepsiCo’s 2.8% intraday gain is directly tied to its aggressive cost-reduction strategy and product rationalization plan. The company announced it will eliminate 20% of U.S. SKUs by early 2026, close three plants, and focus on affordable, natural products to boost margins. These moves align with Elliott Investment Management’s $4B stake-driven push for operational efficiency. JPMorgan’s upgrade to Overweight, citing 'steep discount' to peers and 'record productivity savings,' further fueled buying. The stock’s surge reflects optimism that these measures will unlock value and reverse a 5% YTD decline.

Non-Alcoholic Beverages Sector Mixed as PEP Outperforms
The non-alcoholic beverages sector, led by Coca-Cola (KO), shows mixed momentum. While PEP rallied 2.8%, KO fell 0.05%, highlighting divergent investor sentiment. PEP’s focus on cost-cutting and product innovation contrasts with KO’s stable but less transformative strategy. The sector’s 0.5% intraday gain underscores broader confidence in consumption trends, but PEP’s outperformance signals market preference for its aggressive restructuring.

Options and ETF Plays for PEP’s Volatility-Driven Move
• 200-day MA: 142.28 (below current price) • RSI: 35.07 (oversold) • MACD: -0.07 (bearish) • Bollinger Bands: 143.52–149.80 (trading near upper band)

PepsiCo’s technicals suggest a short-term bullish breakout after testing key support levels. The stock is trading above its 30D MA (145.99) and 100D MA (145.58), with RSI indicating oversold conditions. The MACD histogram’s negative divergence suggests momentum may reverse. Traders should watch the 149.55 intraday high as a potential resistance level. With JPMorgan’s $164 target implying 10% upside, the stock could see extended volatility ahead.

Top Options Plays:
• PEP20251219C148
- Type: Call
- Strike: $148
- Expiry: 2025-12-19
- IV: 22.23% (moderate)
- Leverage Ratio: 56.59% (high)
- Delta: 0.5688 (moderate sensitivity)
- Theta: -0.126966 (high time decay)
- Gamma: 0.071652 (high sensitivity to price changes)
- Turnover: 61,193 (liquid)
- Why it stands out: High leverage and gamma make this call ideal for a 5% upside scenario. Projected payoff: $148.72 → $156.16 (5.7% gain).

• PEP20251219C149
- Type: Call
- Strike: $149
- Expiry: 2025-12-19
- IV: 20.68% (moderate)
- Leverage Ratio: 75.94% (very high)
- Delta: 0.4949 (moderate sensitivity)
- Theta: -0.119855 (high time decay)
- Gamma: 0.078199 (high sensitivity to price changes)
- Turnover: 21,834 (liquid)
- Why it stands out: Exceptional leverage ratio and gamma for a 5% upside. Projected payoff: $148.72 → $156.16 (5.7% gain).

Aggressive bulls should consider PEP20251219C149 into a break above $149.55.

Backtest Pepsico Stock Performance
The backtest of the Performance of the ETF PEP (iShares Core S&P 500 ETF) after a 3% intraday surge from 2022 to now shows mixed results. The 3-day win rate is 49.69%, the 10-day win rate is 46.12%, and the 30-day win rate is 46.75%. However, the ETF experienced a slight decline, with a maximum return of -0.04% over the 30-day period, indicating that while there is a decent probability of positive returns in the short term, long-term performance is lackluster.

PEP’s Turnaround Play: Watch for $164 Target and Sector Leadership
PepsiCo’s rally is a structural play on cost-cutting and productivity gains, with JPMorgan’s $164 target providing a clear ceiling. The stock’s technicals and options activity suggest continued volatility, particularly if the 149.55 intraday high is sustained. Investors should monitor the 146.66 Bollinger Middle Band as a critical support level. With Coca-Cola (KO) down 0.05%, PEP’s outperformance highlights its sector leadership potential. Aggressive bulls may consider the PEP20251219C149 call for a high-leverage bet on the $164 target. Watch for a breakdown below $146.66 to trigger a reevaluation of the bullish case.