We recently published an article titled Jim Cramer’s Thoughts On These 8 Stocks and the Packaged Goods Playbook. In this article, we are going to take a look at where PepsiCo, Inc. (NASDAQ:PEP) stands against the other stocks.
Jim Cramer, the host of Mad Money, recently took a deep dive into the challenges facing the consumer packaged goods sector, offering his perspective on the factors driving the decline of these stocks.
“The recent decline in the consumer packaged goods stocks, I find it breathtaking… Why is this happening? The truth is, there are a host of reasons, and every time you think that things have gotten better, they seem to have gotten worse, much worse than you’ve imagined.”
READ ALSO Jim Cramer’s Thoughts on These 9 Stocks and Jim Cramer Discussed 10 Stocks Leading the Dow Higher in 2025
Cramer noted that many companies within the sector seem to believe that younger consumers will settle for smaller portions of food and that this might mitigate some of the challenges. While Cramer acknowledged that this shift in consumer behavior is part of the equation, he argued that many companies are overlooking the significant impact of GLP-1 weight loss drugs. These medications, which curb cravings for junk food, pose a serious threat, as Cramer sees them as something that could be widely adopted in the United States. He then added:
“Oh, and let’s not forget about the problem of tariffs. You’re getting some sudden price increases for many goods. Someone has to pay for the tariffs. These companies hope it will be you because if it’s not you, it’s them.”
Another significant challenge for companies in the packaged goods space is the difficulty of raising prices. Cramer explained that while many companies try to increase prices, they often face fierce competition from major retailers and online marketplaces, which offer private-label products that consumers increasingly recognize as being just as good as the branded alternatives.
While private labels are not seeing explosive growth at the moment, Cramer pointed out that they are exerting pressure on all prices, including those of established brands. Furthermore, Cramer observed that the price hikes implemented during the COVID-19 pandemic have led to consumer fatigue, with many shoppers now seeking better value.
“I don’t know what turns around the consumer packaged goods stocks, mergers would make sense. This new antitrust department probably blessed the concentration. Maybe the companies that slash prices the deepest ultimately win. No matter, this moment is untenable. The stocks can’t find their footing, just too many forces against them. These used to be safety stocks for heaven’s sake, but they’re safe no more.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money on February 5. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close up of a glass of a refreshing carbonated beverage illustrating the company’s different beverages.
PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 58
Cramer deep-dived into a significant challenge that PepsiCo, Inc. (NASDAQ:PEP) is facing: effects of the weight loss drugs and changes in eating habits.
“The other day, PepsiCo got crushed on weaker than expected earnings… So take PepsiCo, I don’t know if people realize how excellent this company really is. The stock always carried a premium price to earnings multiple, meaning we’re willing to pay extra for its profits. They have terrific brands at Pepsi, Mountain Dew… FritoLay, the latter being one of the most dependable of all staples.
But now PepsiCo’s got a problem because FritoLay is not delivering the consistent numbers that it used to. Why? Management says it’s because younger generations fixate on health and there’s nothing particularly healthy about potato chips or Cheetos. They’ll buy smaller portions. That’s what their hope is. Me? Look, I’m sure that a part, that’s a part of it, but I do think that PepsiCo’s in somewhat of denial about the impact of GLP-1 weight loss drugs from Novo Nordisk, which reported a terrific quarter this morning, and Eli Lilly, which reports tomorrow.”
Cramer then highlighted that taking these weight loss drugs can result in lowered cravings for junk food. Moreover, he noted that they could be used by up to 40 million people in the U.S., a number that might be on the lower side considering that 42% of American adults are obese.”
PepsiCo, Inc. (NASDAQ:PEP) is a leading company in the manufacturing, promotion, and distribution of a wide range of beverages and snack products, including popular brands like Lay’s, Gatorade, Pepsi, Doritos, Tropicana, and Aquafina.
Overall PEP ranks 1st on our list of the stocks Jim Cramer recently discussed. While we acknowledge the potential of PEP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PEP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article was originally published at Insider Monkey.
