PEP - PepsiCo, Inc.
| Previous Close | 119.44 |
| Open | 119.50 |
| Bid | 120.50 x 800 |
| Ask | 120.99 x 1000 |
| Day's Range | 119.45 - 121.29 |
| 52 Week Range | 95.94 - 122.00 |
| Volume | 6,668,099 |
| Avg. Volume | 5,537,813 |
| Market Cap | 169.525B |
| Beta (3Y Monthly) | 0.58 |
| PE Ratio (TTM) | 13.75 |
| EPS (TTM) | 8.78 |
| Earnings Date | Apr 17, 2019 |
| Forward Dividend & Yield | 3.71 (3.11%) |
| Ex-Dividend Date | 2019-02-28 |
| 1y Target Est | 118.00 |
- InvestorPlace•yesterday
7 Marijuana Stocks to Play the CBD Trend
Cannabidiol (CBD) is emerging as a red-hot category of the marijuana industry. CBD includes compounds in the cannabis sativa plant that do not produce a high. In fact, over the years, CBDs have been shown to have powerful therapeutic effects.Now it looks like the U.S. market could open up in a big way for this type of cannabis and several CBD stocks are gaining traction. The reason: In December, Congress passed the 2018 Farm Bill, which declared that CBD would no longer be treated as an illegal substance.So how big could this opportunity be? Well, according to research from the Brightfield Group, the market in the U.S. could hit $22 billion by 2022.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * The 10 Best ETFs to Buy in the Second Quarter No doubt, this could move the needle for marijuana stocks -- and here's a look at seven that stand out: Cronos Group (CRON)Cronos Group (NYSE:CRON) operates a vertically integrated cannabis platform, with a presence across five continents. In terms of the CBD opportunity, the company recently struck a strategic partnership with Gingko Bioworks, which has raised $430 million. The company's founder, Tom Knight, is known as the "father of synthetic biology" and his innovations -- such as with software to print DNA -- should allow for the creation of cannabinoids at a massive scale. This is critical because it can be difficult to produce pure forms that are cost-effective and precise.CRON also has the advantage of substantial financial resources to commercialize its cannabinoids. Last December, Altria (NYSE:MO) invested $1.8 billion into the company for a 45% stake. The deal is certainly a validation of CRON but it will also allow for much broader distribution and improved product development.Of course, a company like MO does engage in substantial due diligence before making an investment. In the latest earnings call, CEO Howard Willard said: "We believe the growth opportunities are significant and will extend across the globe as cannabis markets open. Selecting the right partner in this category was critical and we've done just that. Cronos strong management team has built unique capabilities to compete globally across the medicinal, recreational and nutraceutical categories." Aurora Cannabis (ACB)Aurora Cannabis (NYSE:ACB), a Canadian based cannabis producer, has been building up its CBD business. Part of this has been with its investments in industrial hemp production, such as with the Radient facility in Edmonton. It is expected to get as much as 10,000 kilos per day.Next, ACB has been focused on revving up its product offerings. According to the latest earnings call, Chief Corporate Officer Cam Battley, the company is poised "to launch a broad line of CBD based wellness product in the near future."What's more, ACB has been aggressive with its dealmaking. For example, it has increased its equity position in Hempco and purchased Agropro, which is Europe's largest hemp producer. * 10 Stocks on the Rise Heading Into the Second Quarter Something else to keep in mind: Legendary billionaire investor Nelson Peltz has joined the company as an advisor. This is certainly a major vote of confidence. He not only has deep access to investment capital but a strong network of potential partners, especially in the consumer goods industry. Some of his investments include stakes in PepsiCo (NASDAQ:PEP), Procter & Gamble (NYSE:PG) and Mondelez (NASDAQ:MDLZ). Charlotte's Web (CWBHF)The inspiration for the founding of Charlotte's Web (OTCMKTS:CWBHF) was a CNN documentary -- in 2013 -- about Charlotte Figi, whose health was significantly improved because of a hemp extract.Fast forward to today: The company is the No. 1 brand for the hemp-derived CBD market in the U.S. It definitely helps that it has distribution across more than 3,000 retail locations.And yes, growth has been strong. In the latest quarter, revenues jumped by 57% to $17.7 million and adjusted EBITDA came to $5.4 million, up 31%.To better capitalize on the CBD opportunity, CWBHF recently issued $71.5 million in stock. This will be for cultivation and production to meet surging demand. Here's what the company's CEO, Hess Moallem, had to say: "In general, broader consumer awareness of the benefits of cannabinoids, namely cannabidiol (CBD), and whole plant hemp extract is driving increased uptake in both our retail channels and within our e-commerce platform."In other words, it seems like a pretty good bet that the growth will continue for some time. Zynerba Pharmaceuticals (ZYNE)Zynerba Pharmaceuticals (NASDAQ:ZYNE) is a clinical-stage biotech company that develops cannabinoid therapies for a variety of rare diseases. They include: * Fragile X Syndrome (FXS): This is a developmental disability that has been known to cause autism spectrum disorder. FXS impacts 71,000 people in the U.S. and there are no drug indications for it. * Developmental and Epileptic Encephalopathies (DEE): This is an epilepsy syndrome that involves severe cognitive impairment. About 45,000 children and adolescents have this in the U.S. * Autism Spectrum Disorder (ASD): This includes autism and Asperger's syndrome. ASD affects less than 1 million pediatric and adolescent patients. * 7 Retail Stocks That Will Continue to Rebound in 2019 ZYNE's main candidate is Zygel, which is a CBD formulation gel for transdermal delivery. As for the FXS treatment, there is expected to be a pivotal data release in the second half of this year. And if the trial is positive, then the company will file a New Drug Application (NDA) for Zygel in the first half of 2020. Canopy Growth (CGC)Since 2016, Canopy Growth (NYSE:CGC) has been building its CBD business, with a focus on consumer packaged goods. The company has since created a vertically integrated platform for that includes a set of technologies that have pending patents. What's more, the hemp division is expected to yield 7,000 kilos of hemp-derived CBD on an annual basis. Granted, this cannot be used in the U.S. market. Yet CGC is likely to be a solid partner. For example, the company recently struck a deal with Martha Stewart's Sequential Brands Group, so as to develop CBD remedies for pets.It helps that CGC has substantial resources, which came from a mega $4 billion investment from Constellation Brands (NYSE:STZ). STZ has a strong global footprint -- with operations in the U.S., Mexico, New Zealand, Italy and Canada -- as well as a set of well-known consumer brands, such as Corona Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico. All in all, there is quite a bit of synergy for CGC.In the meantime, the company is growing at a staggering pace. In the latest quarter, revenues soared by 282% to $83 million. GW Pharmaceuticals (GWPH)The origins of GW Pharmaceuticals (NASDAQ:GWPH) go back to 1998. It was then that Dr. Geoffrey Guy and Dr. Brian Whittle co-founded the company to focus on developing therapies using cannabinoid formulations to target areas like epilepsy, glioma and schizophrenia.As of today, the lead product is a liquid formulation of a CBD, called Epidiolex, which received FDA approval in 2018 (the expectation is that there will be an approval in Europe in the second quarter). The drug targets the rare conditions of Lennox-Gastaut syndrome (LGS) or Dravet syndrome, which are variations of epilepsy. Furthermore, there are other indications for Epidiolex, such as Tuberous Sclerosis Complex and Rett Syndrome. * 7 ETFs for a Millennial Portfolio But of course, the company has other treatments. Note that GWPH is looking to get approval in the U.S. for Sativex, which is an oromucosal spray for multiple sclerosis. It is currently available in 25 countries. Horizons Marijuana Life Sciences ETF (HMLSF)If you do not want to buy individual CBD stocks, then you can consider an exchange-traded fund, such as the Horizons Marijuana Life Sciences ETF (OTCMKTS:HMLSF). With this, you'll get exposure to companies like Canopy Growth, Aurora, GW Pharamceuticals, HEXO and Tilray (NASDAQ:TLRY).In all, there are 59 stocks in the portfolio and the net assets are about $1 billion (in Canadian currency). The expense ratio is also 0.75%.Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks That Will Continue to Rebound in 2019 * 5 Stocks To Buy for the Happiest Employees * 7 ETFs for a Millennial Portfolio Compare Brokers The post 7 Marijuana Stocks to Play the CBD Trend appeared first on InvestorPlace.
- CNBC•2 days ago
Cramer: Investors need a new playbook now that the Fed ended rate hikes this year
"We don't need to worry about more rate hikes—and that's why it's causing a sea change in the stock market right now because we're in a low growth environment again," CNBC's Jim Cramer says. Cramer explains what stocks are good to buy in a low-growth environment and which stocks to stay away from. Investors need not worry that the Federal Reserve induced a market "sea change" by calling off interest rate increases this year and adjust their game plan to make money, CNBC's Jim Cramer said Thursday.
Motley Fool•2 days agoPepsiCo's Grounded Growth Strategy
Sometimes the most ambitious path to take is the one you're already following.
- InvestorPlace•2 days ago
Coca-Cola Stock Still Is Too Expensive
I'll be honest: I simply don't understand the bull case for Coca-Cola (NYSE:KO). The KO stock price has held up reasonably well in recent years, admittedly. But Coca-Cola stock isn't cheap. There are obvious risks to demand going forward. Add on disappointing growth, and the numbers here don't seem to add up.Source: Coca-ColaI concede that I've long been a skeptic toward KO stock. I called it "expensive" 20 months ago at roughly the same price, and it's at least held up. On this site, Luke Lango made a "buy the dip" case last month; a few days later, Josh Enomoto highlighted the company's opportunity in China.With all due respect, I disagree. The issue from here is that many investors are valuing Coca-Cola for what it was: a wonderful business that produced steady growth and lockstep increases in its dividend. Coca-Cola stock famously has made billions of dollars for Warren Buffett and Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B). It's also been a great long-term investment for the rest of us.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 10 Stocks on the Rise Heading Into the Second Quarter But times change. And those changes have notably shifted the investment case here. The KO Stock Price Tumbles After EarningsAt this point, it seems increasingly difficult to make the fundamental case for Coca-Cola stock. A multi-year transformation -- including a "refranchising" of its bottling operations -- has hit revenue in recent years, but it was supposed to create a leaner, more profitable company.That's a key reason why the KO stock price fell over 8% after disappointing earnings last month -- a huge move for a typically low-volatility stock. Guidance for 2019 was much weaker than expected. Coca-Cola expects earnings growth of -1% to 1% against 2018's $2.08.Investors were hoping for much more after the refranchising. The problem goes beyond results for a single year, however, as 2019 guidance implies EPS of $2.06 to $2.10. In 2013, Coca-Cola's non-GAAP EPS was $2.08. Over six years, including a massive transformation, earnings per share will barely move, if at all.But even that doesn't tell the full story.Coca-Cola stock, like so many other U.S.-based investments, has benefited from a lower tax rate. The underlying (i.e., adjusted) tax rate in 2013 was 23%. It's estimated to be 19.5% in 2019. That lower rate provides a 4.5% benefit to net earnings. Billions of dollars in share buybacks boost EPS as well. Considering this, Coca-Cola has 4.5% fewer shares outstanding than it did in 2013. In other words, KO is making less pre-tax profit than it did six years ago (the figure has declined about 8.7% by my math).And yet, Coca-Cola stock trades for 22x the midpoint of 2019 EPS guidance. That multiple seems incompatible with the performance over the past few years. The Risks to KO StockTo be fair, a stronger dollar has been an issue, hitting revenues and profits overseas. Coca-Cola is projecting a significant currency headwind, with 6% to 7% impact on operating income in 2019 alone. This comes after a 4% hit in 2018. Essentially, much of the potential benefit of the refranchising has been swallowed by currency effects.That said, it's not as if the dollar is guaranteed to get weaker going forward. KO stock still looks reasonably expensive against even currency-neutral growth. Meanwhile, risks are rising.Soda consumption continues to decline in the U.S., dropping by 20%-plus over two decades according to one report. Coca-Cola has tried to diversify, acquiring Costa Coffee and sparkling water manufacturer Topo Chico last year. But a $5 billion coffee deal -- let alone a $220 million bottled water purchase -- doesn't move the needle much against a $200 billion market cap.The trend here is consistently negative, particularly in terms of diet soda. Sparkling waters from Nestle (OTCMKTS:NSRGY), National Beverage (NASDAQ:FIZZ) (even with some recent trouble), and private companies like Polar and Spindrift are taking share from diet soda. Neither Coke with its Dasani brand, nor Pepsi (NASDAQ:PEP) with its Aquafina, have been able to win much in that market. New BrandsMeanwhile, HSBC Securities highlighted an interesting stumbling block for Coca-Cola's plans for expansion. Coca-Cola has looked to new extensions, including flavored Diet Coke and an orange-vanilla offering for its full-calorie brand. But, as HSBC pointed out, those efforts are likely to upset the same bottlers who have taken over Coke's operations.Smaller products have high startup costs, as well as long payback periods. Coke's refranchising may slow it from following the brand expansion strategy that's currently popular among consumer companies. It's a bit analogous to the risk facing Coke customers McDonald's (NYSE:MCD) and Restaurant Brands International (NYSE:QSR). Those companies have shifted costs to their franchisees too. However, those franchisees may rebel as their parents look to compete solely on price or otherwise push the limits of their profitability. Not Enough GrowthFrom here, zero growth isn't worth the risks facing the industry. As such, KO stock looks far too expensive. I asked last year if Coca-Cola might be the next giant to stumble after consumer heavyweights Anheuser-Busch InBev (NYSE:BUD), Kraft Heinz (NASDAQ:KHC), and Altria (NYSE:MO) saw big declines.It hasn't happened yet, even with the post-Q4 selloff. But I wouldn't be shocked if it did. In fact, I'd be less surprised if KO stock fell sharply than if Coca-Cola somehow figured out how to grow in an industry destined for long-term declines.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Specialty Retail ETFs to Buy the Industry's Disruption * 5 Stocks To Buy for the Happiest Employees * 3 Out-of-Favor Consumer Stocks to Buy Compare Brokers The post Coca-Cola Stock Still Is Too Expensive appeared first on InvestorPlace.
- Zacks•2 days ago
Here's What You Must Know About Keurig Dr Pepper (KDP) Stock
Keurig Dr Pepper's (KDP) growth strategies like acquisitions and partnerships position it for long-term growth. However, softness in the Coffee Systems business remains a hurdle.
- Market Realist•3 days ago
Monster Beverage Stock Falls as Goldman Sachs Lowers Its Rating
Monster Beverage Stock Falls as Goldman Sachs Lowers Its RatingStock falls on rating downgradeMonster Beverage (MNST) stock fell 2.5% on March 20 after Goldman Sachs downgraded its rating for the energy drink maker to a “hold” from a “buy.”
GuruFocus.com•4 days agoTamra Doubles Sales and Earnings in 6 Years
Norway-based Tomra Systems ASA (TMRAF)(TMRAY) is the largest manufacturer of reverse vending machines in the world. Warning! GuruFocus has detected 5 Warning Signs with TMRAF. The stock trades for 244.50 krone ($28.67), there are 147.74 million shares and the market cap is 36.1 billion krone ($4.185 billion).
- Investopedia•4 days ago
Top 5 Companies Owned By Pepsi
PepsiCo is the maker of several of the world's top soda brands, but Pepsi also owns stakes in many other businesses as well. Discover the top companies that have propelled the growth of PepsiCo during the last twenty years.
- Morningstar•4 days ago
Our Ultimate Stock-Picker's Top 10 Dividend-Yielding Stocks
The vast majority of our Ultimate Stock-Pickers are not dividend investors. Warren Buffett at Berkshire Hathaway BRK.B has spoken highly of companies that return capital to shareholders and is not against investing in and holding higher-yielding names. As you may recall from our previous dividend-themed articles, when we screen for top dividend-paying stocks among the holdings of our Ultimate Stock-Pickers we try to find the highest-quality names that are currently held with conviction by our top managers.
- Zacks•5 days ago
PepsiCo (PEP) Outpaces Stock Market Gains: What You Should Know
PepsiCo (PEP) closed at $117.22 in the latest trading session, marking a +1.35% move from the prior day.
- PR Newswire•5 days ago
PepsiCo Announces Senior Leadership Appointments for Latin America Business
Paula Santilli, currently President of PepsiCo Mexico Foods (PMF), has been appointed to the role of Chief Executive Officer, LatAm, reporting to PepsiCo Chairman and CEO Ramon Laguarta. Santilli assumes the role from Laxman Narasimhan, who was recently named Global Chief Commercial Officer of PepsiCo.
- Motley Fool•6 days ago
Aurora Cannabis Finally Lands a Partner... Sort Of
The most polarizing marijuana stock hires a billionaire strategic advisor with only a so-so record of success.
- Zacks•6 days ago
Why Is PepsiCo (PEP) Up 2.7% Since Last Earnings Report?
PepsiCo (PEP) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
- Motley Fool•7 days ago
3 Great Stocks You Can Buy and Hold Forever
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- Benzinga•8 days ago
Pot Stocks, ETFs, Top News And Data From The Cannabis Industry This Week
It was another news-filled week in the weed world... Nelson Peltz joined Aurora Cannabis Inc (NYSE: ACB ) as a strategic advisor ; Harvest Health & Recreation Inc (OTC: HRVSF ) acquired Chicago-based Verano ...
- InvestorPlace•8 days ago
As Credit Suisse Says Pepsi Stock Could Fall 14%, Is KO Stock A Better Buy?
PepsiCo (NASDAQ:PEP) has become a favorite among investors. How could it not, given its consistency, continued growth and dividend increases? Yet, as good as PEP stock is, not everyone is sold on the beverage and snacks maker. Who's not on board? Credit Suisse analysts.Last week, the research team initiated coverage on the Pepsi stock with an underperform rating and $100 price target on shares. The stock didn't really feel the impact of that downgrade -- given the strength of the overall market lately -- but as it stands, the target implies just under 14% downside from yesterday's $115.50 close.Is that something investors really need to look out for and if so, should they consider Coca-Cola (NYSE:KO) instead? KO stock sits midway between its 52-week low and high.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Evaluating PepsiCoWorth pointing out (or maybe not) is that Credit Suisse has the lowest price target on the Street. The average target is at $117.75, not much higher than current levels, while the highest sits up at $133, implying just over 14% upside.The analyst is critical over PEP stock's valuation, which is admittedly a bit high. The stock trades at more than 21 times this year's earnings. That wouldn't be all that bad for a blue-chip stock, but the growth profile is disappointing. Analysts expect the company to earn $5.51 per share this year, which is a 2.7% decline from 2018. That's despite 2.5% sales growth this year.Over the last five years, PEP stock has an average forward price-to-earnings ratio of 19.9. If that were the case now, that would put Pepsi stock down near $109. * 7 Winning High-Yield Dividend Stocks With Payouts Over 5% Perhaps investors are excited about the company's prospect of growing earnings and sales 7.8% and 3.9% in fiscal 2020, respectively, but that's a long ways off. Some further digging shows Pepsi stock has other strains.While gross margins are ticking higher in the recent quarter, they have been trending lower for over two years on a trailing 12-month basis. Operating margins have come under pressure over the past few quarters, while free cash flow has been greatly pressured. In 2016, the company generated more than $8 billion in free cash flow, while in 2018 it barely eclipsed $6 billion. Trading Pepsi Stock Click to EnlargeIs PEP stock a bad company to own? Absolutely not. After the company's 15.2% dividend bump last May, the stock pays out a respectable 3.2% yield. For long-term investors, this potential decline isn't likely enough of a reason to sell the stock. But perhaps it will cause them to wait for a decline before buying more.I don't know if we get Pepsi down to $100 without a market-wide correction. That said, its valuation is stretched at a time when growth isn't exactly robust. As for the PEP stock price, take a look at the three-year weekly chart above. Support and resistance are quite clear, while uptrend support (in blue) makes its way higher. * 7 Top Stocks to Buy From Goldman Sachs' Secret Portfolio The Doritos maker is a good company, so I'd be interested on a pullback into support, (although we won't likely get it at $96 like we did last time). Because the Pepsi stock valuation is stretched, it makes me hesitant to buy -- even on a move over resistance, given this isn't the type of quick-moving momentum stock that investors typically trade. KO Stock or PEP Stock?So that brings up the question, should investors buy PEP stock or KO stock?To much surprise, KO stock might be the better buy, at least right now. Coca-Cola stock trades at almost 22 times this year's earnings, which is only slightly higher than Pepsi. However, analysts expect earnings to grow 1% this year on the back of 9.3% sales growth. In 2020, forecast call for a similar outlook to Pepsi, which is for 7.6% earnings growth and 4.4% sales growth.Coke has superior growth in 2019 and similar growth in 2020, while maintaining similar free cash flow profiles and superior margins to PEP. Also worth mentioning is KO stock's dividend yield, which stands at 3.5%.That said, KO stock doesn't have a screaming-low valuation and its earnings growth is somewhat disappointing given the more than 9% sales growth this year. The chart looks decent though. Click to EnlargeSupport at $43.50 to $44 continues to hold, while KO stock is above the 200-day level and is now coiling just beneath $46. We got lucky with our sell call at $50 and now may be a time to add back to that position a bit.The conclusion? Neither KO stock or PEP stock jumps out as a massively better pick than the other. Over the next 12 months though, Coca-Cola stock seems to have the edge.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Stocks Sitting on Huge Piles of Cash * The 10 Best Stocks to Buy for the Bull Market's Anniversary * 7 Dividend Stocks With Big Yields Compare Brokers The post As Credit Suisse Says Pepsi Stock Could Fall 14%, Is KO Stock A Better Buy? appeared first on InvestorPlace.
- Motley Fool•9 days ago
Here's the Real Reason Aurora Cannabis Shares Caught Fire Yesterday
Aurora is hoping to attract a big-time partner to fund its global expansion.
- Motley Fool•9 days ago
3 Dividend Aristocrats to Buy and Hold Forever
Here's why investors should arguably never sell their shares of AbbVie, PepsiCo, or McDonald's.
- MoneyShow•9 days ago
The Timely Ten- Blue Chip Buys with Value and Yield
Our The Timely Ten list represents our top ten current recommendations from among our universe of undervalued blue chip stocks, explains dividend expert Kelley Wright, editor of the industry-leading advisory service, Investment Quality Trends.
- TheStreet.com•10 days ago
Nelson Peltz Could Be Key to Cannabis in Consumer Packaged Goods
to disrupt the consumer packaged goods (CPG) industry. Shares of the Canadian cannabis company are soaring on Wednesday, marking double-digit gains for much of the trading day after the announcement of Peltz's new advisory role. "Nelson is a globally recognized business visionary with a strong track record of constructive engagement to generate accelerated, profitable growth and shareholder value across many industry verticals that are of great interest to us," Aurora CEO Terry Booth commented.
- InvestorPlace•10 days ago
Target Continues to Hit the Bullseye
Target (NYSE:TGT) CEO Brian Cornell was hired by the Minneapolis-based retailer on July 31, 2014. Since then, Target stock is up 46%. Not bad for a company that was thought to be losing the discount war to companies like Walmart (NYSE:WMT) when the former head of PepsiCo's (NASDAQ:PEP) global food business took the job. * 15 Stocks Sitting on Huge Piles of Cash Source: Mike Mozart via Flickr (Modified)InvestorPlace - Stock Market News, Stock Advice & Trading TipsYear to date, Target stock is up 16% through March 11, less than four bucks away from $80, a level it's only seen twice -- August 2015 and August 2018 -- since Cornell's been in the top job. In November 2017, I wondered if Target could hit $80 in 2018. "Can Target deliver an $80 stock in 2018? It's going to be even tougher after the latest hit to its share price," I wrote. "I'll reserve judgment until after Black Friday, but business does appear to be getting stronger. And that's all you can ask for as an investor."In the 16 months since my comments, Target's business has come on like gangbusters, but it's hardly been reflected in its share price. Here's why I think that's about to change. Business Is GoodTarget announced its fourth-quarter results March 5. They were very solid with full-year same-store sales growth of 5.0% -- brick-and-mortar up 3.2%, while digital sales increased 36% on a comparable basis -- and bottom-line adjusted earnings per share of $5.39, 15.1% higher than a year earlier. My InvestorPlace colleague Dana Blankenhorn called Target a good yield stock after it reported earnings, but not a good buy if you're looking for capital gains. I respectfully disagree.Perhaps it was a mirage, but Target's traffic and same-store sales growth in 2018 were the best the company's achieved in over a decade. Furthermore, its adjusted EPS set a record this past fiscal year. Those are hardly the hallmarks of a business in decline. The fact is, if you exclude the extra week in the fourth quarter of 2017, Target's Q4 results were significantly stronger than its reported numbers. On the top line, Target's revenue was $22.7 billion, flat compared to a year earlier. However, if you exclude $1.62 billion, the average of 14 weeks in 2017, the company's sales increased by 7.7%. On the bottom line, EPS increased by 12.5%, significantly better than the reported decrease of 23.5%. Looking ahead, Cornell sees low- to single-digit same-store sales growth in fiscal 2019, with GAAP earnings-per-share growth of at least 6.7%. Both are likely very conservative given the fact that Target's EPS guidance when it reported Q4 2017 last March was between $5.15 and $5.45 a share. With digital sales growing at a blistering pace and traffic better than it's been in a long time, only a severe correction in consumer sentiment is going to slow Target's business. Cannibalization Isn't an IssueTaking a page out of the Best Buy (NYSE:BBY) playbook, Target has optimized its retail footprint to meet growing online sales. Some analysts see this move hampering the retailer's in-store sales. Target doesn't see it quite the same way. "Since 2016, we've made our stores more productive by using them as fulfillment centers. Our fulfillment sales per square foot have grown at an average 67% rate per year. Now, more than $14 a foot as our stores increasingly support our digital business," COO John Mulligan said during Target's conference call. "At the same time, our in-store sales per square foot have grown at a 4% rate per year, which means our Target stores can support incremental growth from Target.com without hurting in-store sales."Investors have seen firsthand how Best Buy has been able to fend off Amazon (NASDAQ:AMZN) by providing consumers an omnichannel shopping experience that works. Target's merely doing the same thing. And the fourth-quarter numbers bear that out. Target's using its store-as-a-hub strategy to grow faster. Forfeiting a few percentage points -- Q4 2018 gross was margin was 25.7%, 40 basis points lower than a year earlier -- in the name of growth is a good thing. Just ask shareholders who've held TGT stock for more than a few years. The Bottom Line on Target StockOver the past two years, Target's capital expenditures have topped $6 billion, as it continues to invest in its business. Take out the impact of the Tax Act and Target's return on invested capital increased by 100 basis points in fiscal 2018 to 14.6%. Not everything's perfect about Target's business. It continues to struggle with its grocery store business. It's not so much that it isn't growing sales -- its food and beverage business has increased for six consecutive quarters -- but it doesn't have a coordinated strategy to take its grocery game to the next level. I believe Brian Cornell and the rest of the Target team are on top of the situation. In 2-3 years, investors won't recognize the company's grocery business. * 10 Dividend Stock Winners Under $75, I'd be a buyer of Target. Under $70, I'd back up the truck. As of this writing Will Ashworth did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 of the Best Stocks to Buy Under $10 * 7 Retail Stocks Winning in 2019 and Beyond * The 10 Best Stocks to Buy for the Bull Market's Anniversary Compare Brokers The post Target Continues to Hit the Bullseye appeared first on InvestorPlace.
- InvestorPlace•10 days ago
Buy the Dip in National Beverage Because FIZZ Stock Is Ready to Pop
From the looks of it, National Beverage Corp. (NYSE:FIZZ) is a brand in crisis mode. The parent company of leading sparkling water brand La Croix has seen its growth narrative come off the rails over the past several quarters as competition in the sparkling water category has heated up and broader market growth has cooled for FIZZ stock.Source: H. Michael Karshis (Modified)Meanwhile, management appears to be in damage control mode, the PR backlash hasn't been great, and the outlook for demand and profit growth to return in the near term is bleak.All together, FIZZ stock has dropped from a 52 week high of $120-plus six months ago, to prices below $60 today.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAt this point in time, the bear thesis on FIZZ stock looks pretty compelling. You have a brand that is rapidly losing mind and market share in a slowing market, with falling margins and rising opex rates, too. All together, National Beverage Corp. will likely pivot into an era of sideways profits for the foreseeable future, which should lead to further weakness in FIZZ stock. * 15 Stocks Sitting on Huge Piles of Cash That thesis sounds good. But, it misses one big element: valuation.At current levels, FIZZ stock is dirt cheap. It's already priced for all those negatives. But, in the event that National Beverage Corp. actually turns sales around and stabilizes margins, this stock could fly higher.I think that's what will happen. In the big picture, National Beverage Corp. is losing share in a rapidly growing market that has supported and will continue to support multiple high volume brands. La Croix will be one of those high volume brands. As such, sales will stabilize. So will margins. And profits.None of that stabilization is priced in today. That's why now looks like the right time to buy the dip in FIZZ. The Brand Is Losing SteamThere's no question about it; La Croix is losing momentum. Revenues rose 18% last year. Then, throughout the course of fiscal 2019, they have fallen from 18% to 13%, to 7%, and finally to down 3% last quarter. As revenue growth has slowed, gross margins have come under pressure, as have opex rates. All together, profit growth has pivoted from hugely positive, to hugely negative.There's a few reasons behind this big pivot. First, the sparkling water category is slowing. There's nothing that National Beverage Corp. can do about this. Sparkling water market growth rates have steadily declined over the past several years, as is only natural for a red hot market with big growth rates.Second, competition in the sparkling water category has picked up. There's also nothing that National Beverage Corp. can do about this. More competitors have entered this market, include PepsiCo (NYSE:PEP) with their flavored sparkling water drink Bubly. Those new competitors have stolen share from La Croix.Thus, largely due to no fault of its own, La Croix brand is losing momentum. The financial implications of this are meaningful. Revenue growth will be way slower going forward thanks to falling market share. Gross margins will be pressured for the foreseeable future due to bigger pricing competition. Opex rates will head higher as the company will have to spend more to compete on the awareness front.Putting all that together, it's easy to see that National Beverage Corp's profit growth over the next several years won't be great. After back-to-back years of 30%-plus profit growth, investors weren't expecting great. As such, FIZZ has come under significant selling pressure over the past several quarters as weak profit growth has turned into a reality. The Valuation Is Cheap Enough to BuyWith sales slowing, margins retreating, and profits shrinking, it's tough to see why you would want to buy FIZZ here. But, the bull thesis is pretty simple. All those negatives are already priced in. Eventually, they will fade out. When they do, the stock will pop in a big way.The reality is that, while La Croix is losing market share to newer entrants in the sparkling water category, this brand still remains one of, if not the, most important brand in the sparkling water market.It's easy to see La Croix's dominance weakening going forward. But, it's equally tough to see the brand not being one of the top sparkling water drinks in any time horizon, given that La Croix has become almost synonymous with sparkling water.As such, La Croix should be able to grow revenues at a slightly slower rate than the entire sparkling water category. The entire sparkling water category projects as a double-digit grower over the next several years. Thus, La Croix should be able to grow revenues at a high single digit rate during that stretch.Gross margins will come under pressure, but should stabilize as competitive forces stabilize. Opex rates will likewise move higher, but should retreat in the long run thanks to high single digit revenue growth and stabilized competition.Overall, I think sparkling water market expansion can drive National Beverage's EPS towards $5 by fiscal 2025, even against a competitive backdrop. Coca-Cola (NYSE:KO) and Pepsi normally trade around 20 forward earnings. Based on that comp average 20 forward multiple, a realistic fiscal 2024 price target for FIZZ stock is $100. Discounted back by 10% per year, that equates to a fiscal 2019 price target of over $60.FIZZ trades at under $60 today. Thus, it's reasonable to say that, even considering all the competitive risks, FIZZ stock is undervalued relative to its long term growth prospects. Bottom Line on FIZZ StockI used to drink a lot of La Croix. Now, I drink some La Croix and some Bubly. Apparently, I'm not the only one who has started drinking Bubly, and FIZZ stock has dropped big as a result.But, I still drink La Croix, as do a ton of consumers, and the whole sparkling water category is still growing by a ton. Thus, growth in the long run will stabilize and remain healthy. FIZZ stock currently isn't priced for this. That's why buying the dip here looks like an opportunity.As of this writing, Luke Lango was long FIZZ. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 of the Best Stocks to Buy Under $10 * 7 Retail Stocks Winning in 2019 and Beyond * The 10 Best Stocks to Buy for the Bull Market's Anniversary Compare Brokers The post Buy the Dip in National Beverage Because FIZZ Stock Is Ready to Pop appeared first on InvestorPlace.
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