This Market Sell-Off Might Trigger a Value Rotation Into Pepsi

Investors must always understand where they are in the stock market cycle. This is easier said than done, as all the noise can often blind participants to what they should be looking into and thinking about as well. However, occasionally, a certain indicator flashes to give investors an idea of where capital might be flowing. Breaking things down into simplicity, there are only two major areas that capital often prefers.

PepsiCo Today

On one end is the world of value stocks, not known for their exciting growth or volatility but rather for their stability and long-term promise of an adequate return. On the other hand, investors can consider growth stocks, which are a bit more speculative in nature, to say the least, and therefore more tied and correlated with the overall business and economic cycle.

Therein lies the indicator investors can track: a performance or ratio between value and growth stocks, which will be broken down in a minute. What really matters is that today’s level points to a potential rotation back into value, which always lines up with a volatile S&P 500 such as today’s. That is precisely why considering shares of PepsiCo Inc (NASDAQ:PEP) could be a winning strategy in the coming months and quarters.

What’s Driving Rotations Right Now

To track this safety versus speculation gauge, investors should add broader coverage of value and growth to their watchlists. This is where the iShares S&P 500 Value ETF and the iShares S&P 500 Growth ETF can come into play, representing value and growth, respectively.

Far from just looking at a single chart or price action, investors need to start thinking like professional traders, who see most of the financial world in ratios and relative performance, so to speak.

When charted as a ratio, it becomes obvious that value stocks, relative to growth, have now hit a very important cyclical low point, prime for a reversal.

Of course, rotations don’t happen on their own—they require a catalyst. Today’s news cycle is largely driven by the impact of President Trump’s recently imposed trade tariffs, which are complicating earnings and economic forecasts for investors and economists alike.

This uncertainty translates into volatility, which is no friend of growth stocks.

So, investors have a paved road ahead to justify a rotation back into value stocks from this current cyclical low.

Not all value stocks are standing on equal ground today; some offer better opportunities than others.

Why Is Pepsi Stock a Top Choice?

Some value stocks offer a decent risk-to-reward setup for investors today, but nothing big enough to trigger the type of rotation and investments being considered today. This is why Pepsi stock, which only trades at 71% of its 52-week high, becomes a top target for buyers hungry for safety and upside.

More than just its price action relative to 52-week highs, investors can note the company’s forward price-to-earnings (P/E) ratio of just over 16.0x, which is also lower than even the peak months of the COVID-19 pandemic, when the entire United States economy was essentially closed.

Today’s world, tariffs or not, is nothing close to being as dire or uncertain as when the pandemic was around, giving Pepsi stock no justifiable reason to be trading this low. That’s the biggest opportunity of all, and it is already being taken advantage of by bold buyers out there.

Capital Is Warming Up To Pepsi Stock

As of mid-May 2025, institutional buyers from UBS Asset Management decided to boost their stakes in Pepsi stock by 1.8%. This may not sound like much on a percentage basis, but it was enough to get them to a stake worth up to $1.7 billion today, giving investors another pillar of strength to lean on.

These buyers may see more than just a discount in PepsiCo, as its position in the consumer staples sector likely offers a reliable cushion against today’s market volatility. And the optimism doesn’t stop there.

Wall Street analysts now have a consensus price target of up to $160.7 per share on Pepsi stock. This would call for a rally of as much as 23.2% compared to today's prices, which should excite investors during this uncertainty.

But what about timing? Investors using a dollar-cost-averaging strategy can continue buying Pepsi at these deep discounts. Those with a more aggressive approach can watch the value versus growth ratio and wait for a breakout, which is one of the strongest signals that more capital may soon flow into Pepsi.

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Written By: MarketBeat.com