Credit Suisse says Pepsi is benefitting as people stock up on goods to weather the coronavirus. Yahoo Finance’s Emily McCormick joins Seana Smith to discuss.

Video Transcript

SEANA SMITH: Let's talk about an interesting call from Credit Suisse. They actually upgraded Pepsi, and it's all tied to the coronavirus. And the bank is saying that Pepsi has a strong lineup of drinks, or will likely get stronger. And they also expect Pepsi to get a boost from people stocking up their pantries with snacks because of the coronavirus outbreak. Emily McCormick has this story for us, and, Emily, it was a double upgrade to outperform by Credit Suisse.

EMILY MCCORMICK: Absolutely. And also a rare increase on price target even amid this drawdown that we've seen in the broader market. So Credit Suisse now has a price target of $144 for PepsiCo in the next 12 months. That's an about 20% return based on yesterday's closing prices. Their previous price target had been $138 per share. These analysts called PepsiCo a, quote, "high-quality asset trading at a discount with near-, medium-, and long-term drivers." And here are those drivers.

So in the near term, Credit Suisse said the coronavirus really shows the defensive nature of PepsiCo overall, especially its strong positions in water, sports drinks, and juice. It's been one of the companies that's directly benefited as consumers have gone out and panic bought essentials, snacks, food, and drink amid the coronavirus outbreak. They particularly emphasized Frito-Lay, which comprises about a quarter of total sales, and said that this brand will likely continue to grow strongly. Frito-Lay had also already been coming from a position of strength last year, when sales had grown 4 and 1/2%. And the brand had gained market share for a fifth straight year.

And looking out further even after the coronavirus outbreak, Credit Suisse highlighted, for the medium term, North American Beverage sales are likely going to start improving for PepsiCo. That had actually been an area of weakness for the company over the past several quarters. And they highlighted, in particular, Pepsi's aggressive move into the energy drink category with its acquisition just announced for Rockstar. And then, over the longer term, it said that the company's about $12 billion in investments in M&A, advertising, and product innovation will continue to reap benefits over the years to come.

SEANA SMITH: Yeah, and, Emily, it's interesting because Credit Suisse isn't the only Wall Street firm that's getting a little bit more positive on Pepsi. We also had calls earlier this week from Morgan Stanley and from RBC. They've raised their ratings on the stock.

And I think it also just points to the fact that Pepsi is doing more to better compete with its bigger rival out there, which is Coca-Cola. I mean, you just talked about the fact that they're pouring more money into their drink business, into their North American Beverages. It's been a weak point for the company. But they're investing there, and they want to succeed more in that business just in terms of how that stacks up against some of their rivals.

EMILY MCCORMICK: Definitely. And if we look at analyst calls overall, according to Bloomberg data, PepsiCo has 14 buys, eight holds and zero sells right now. So, overall, Wall Street is pretty bullish on the company. Shares are down 10.6% or so for the year to date, but it is outperforming against the S&P 500, which is down just about 21% right now.

SEANA SMITH: All right. Emily McCormick, thanks so much.