PepsiCo, Inc. (PEP) stock is trading higher by nearly 3% in Monday’s pre-market session after the company beat profit estimates of $1.25 per share of $0.07 on $15.95 billion in the second quarter of 2020 sales. Revenues have also exceeded expectations in spite of a 2.1% year-to-year decline, highlighting a challenging business environment. The company has refused to give the orientation exercise because of the increased uncertainty as a result of the COVID-19 pandemic.
The snack and beverage giant is well positioned in a recession-resistant industry, which has gotten a lot of attention up to the year 2020. It also provides a good 3.05% before the dividend yield in a bond market environment that was difficult to maintain interest rates above zero. Third, and most importantly, PepsiCo is the “best in class” compared to major peers which include Dow component The Coca-Cola Company (KO) with Pepsi regularly beating estimates publish an endless series of new highs in February 2020.
Wall Street Consensus
Wall Street consensus is surprisingly mixed, with a “Moderate Buy” rating, assembled from six “Buy” and six “Hold” recommendations. No analysts are recommending that shareholders sell their positions at this time. PepsiCo’s reputation as a haven of safety can be achieved its ranking because the inhabitants of Manhattan have been pounding the tables, telling customers to pick up growth stocks pummeled in the first quarter rather than charge on the income plays.
In spite of Wall Street’s hesitation, PepsiCo’s stock has held firm in the top half of the first quarter trading range, oscillating back and forth on the closely aligned 50 and 200 days exponential moving averages (EMAs). This model can now provide a stable platform for an impulse purchase that the tests of February all-time high of $147.20. The Accumulation of readings have already risen to new heights, generating a strong wind from the back that predicted the price will soon follow.
PepsiCo’s Long-Term Chart (1987 – 2020)
The stock recovered quickly from the 1987 crash, and the publication of new annual summits in 1993 to peak at a split-adjusted $21.82. It broke out again in 1995, and has continued its steady upward trajectory in 1998, stalling at $44.81. The price action ignored the 2000 to 2002 bear market, underlining its status as a safe haven, and reached new heights in a narrow rising channel between 2001 and 2008 in excess of $79.79.
An economic decline, thanks to the collapse carved out an Elliott five wave pattern that came to a stop at the end of six years in the $40 in March 2009, paving the way for a resumption of the wave that took more than five years to complete a round-trip in 2008 to the top. An escape in the second quarter of 2013 has reverted to the stock of leadership of the state, of the sculpture on a rise of the canal halted by 2015 and 2018, the downward currents. He recovered quickly after the two selloffs and negotiated channel resistance.
PepsiCo Short-Term Chart (2019 – 2020)
In February 2020 channel breakout took failed quickly, which gives a pandemic driven by a decline that ended a 21-month low near $100. The strong rebound in the second quarter of the impasse, in April, after having reached the .786 Fibonacci sale retracement level, marking the highest in the last three months. The price action since that time has carved out a bottom bull flag pattern that predicts a follow-through rally that reached in 2020 resistance.
The stock is trading at near 138.50 in advance of Monday’s opening bell, above the .786 Fibonacci sale retracement level. This price will also be the signal of a flag breakout, if it holds in the regular session, raising the odds for a dynamic driven by the impulse to target the February high, which was closely aligned with long-term channel resistance. The balance volume (OBV), the accumulation-distribution indicator has already risen to a new peak, indicating that a first breakout attempt could generate a bullish trend is sustained.
The Bottom Line
PepsiCo is trading higher after beating top and bottom line estimates, and the stock can now test February of all time.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.