On Tuesday, PepsiCo (PEP -2.69%) didn't provide much of a sugary, caffeinated buzz for its shareholders. It wasn't directly the company's fault, as the key reason for the dip was an analyst's recommendation downgrade. This pushed the stock down by nearly 3% in price, a notably steeper drop than the 0.2% decline of the S&P 500 (^GSPC -0.17%).
The researcher behind the downgrade was top U.S. lender Bank of America, in the person of pundit Bryan Spillane. He changed his view of PepsiCo from buy to neutral, and cut his price target to $155 per share from his former level of $185.
According to reports, Spillane was particularly concerned about an important pillar of the company's business. He wrote that PepsiCo, which specializes in both beverages and snacks (unlike its drinks-only archrival Coca-Cola) is suffering from market share declines in the latter category.
Specifically, Spillane wrote that PepsiCo's Frito-Lay snack products were a weak spot. Prices for these goods were raised; however, this affected sales volume. Meanwhile, many consumers have been cutting back on nonessential items like snack products.
The analyst added that this is compounded by a lack of dynamism in the drinks segment, where the company hasn't been competitive in currently popular segments such as flavored, carbonated soft drinks; energy beverages; and low-sugar offerings.
On top of Spillane's convincing argument, we can add trade war uncertainty into the mix for PepsiCo. If our current tariff spat with various trading partners drags on for a long time, it could drive up the input costs for companies in this country that still make things -- such as this drinks and snacks giant.
Given the company's notable headwinds these days, it doesn't seem very appealing as a stock at the moment.
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