The U.S. Federal Trade Commission (FTC) has filed a lawsuit against beverage and snack company Pepsi (PEP) for allegedly offering preferential pricing to a large retailer that was confirmed to be Walmart (WMT). This practice, the FTC claims, led to higher consumer prices as other retailers, including grocery chains and independent convenience stores, were forced to pay more.
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The lawsuit, which was filed in New York, accuses Pepsi of violating the Robinson-Patman Act, a law that aims to prevent discriminatory pricing practices. The FTC alleges that Pepsi’s actions unfairly disadvantaged smaller retailers and contributed to higher prices for consumers.
FTC Chair Lina Khan stated that the lawsuit aims to ensure fair competition among retailers, regardless of size. However, the FTC’s two Republican commissioners, including incoming Chair Andrew Ferguson, voted against the case.
UBS Cuts PEP’s Price Target
In a separate development, UBS analyst Peter Grom recently lowered the firm’s price target for PepsiCo from $193 to $175 while maintaining a Buy rating. This move reflects the bearish sentiment around Consumer Staples, which has underperformed the broader market by nearly 50% over the past two years. According to UBS, much of the negativity surrounding Consumer Staples is justified.
Despite a favorable macroeconomic backdrop, many companies in the sector have failed to meet expectations for top and bottom-line growth. UBS cites several challenges, such as a stronger U.S. dollar, rising commodity prices, and uncertainty around tariffs following the U.S. election. While UBS advises investors to be cautious ahead of a potentially challenging earnings season, the firm notes that the risk/reward profile for PepsiCo could become increasingly attractive.
Is PEP a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PEP stock based on four Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 9% decline in its share price over the past year, the average PEP price target of $167.86 per share implies 13.6% upside potential.
