Andy Wang TD Ameritrade Network

Andy Wang on the Markets, Pepsi, and FedEx

Andy Wang returned to The Watch List with Nicole Petallides this afternoon to discuss the financial markets, PepsiCo, and FedEx Corp.

Highlights include:

The Stock Market

  • The current environment feels a bit bubble-like with daily leadership rotating from one sector group to another. 
  • Some concept stocks are moving sharply to the upside without regard to underlying fundamentals.
  • One way to balance speculation is to focus on dividend paying stocks that are attractively valued -- where there is income combined with potential appreciation.  

PepsiCo, Inc. (PEP)

  • Pepsi remains well positioned given its strong brand portfolio, especially Frito Lay, and long-term growth opportunities in Beverages.
  • In the last few months, people are eating more snacks while at home. We don't know if this is a structural change to how we eat, but Pepsi launched Snacks.com, a direct-to-consumer website that is well positioned to serve the shift toward online shopping habits which have accelerated during the pandemic.
  • Its likely that Pepsi will pivot Mountain Dew toward the Energy Drink category with new innovation and marketing. This is a growing area that could drive top line growth. 
  • Stock is trading at 23x next year's EPS of $5.87.
  • Dividend yield 3.1%.

FedEx Corp (FDX)

  • Fedex shares were already down going into coronavirus because of trade war concerns and investors remain uncertain how competition from Amazon logistics might impact delivery carriers.
  • During the quarantine, we have seen very high volume shipments from online orders.
  • Both UPS and Fedex have raised delivery surcharges to its high volume customers, and this pricing power could continue through the year.
  • Investors should watch to see if Fedex benefits as states reopen and if pent-up demand drives a return to its more profitable segment, shipments to business customers.
  • FedEx shares are trading at just 14.4x next year's consensus earnings estimate of $10.02.

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About the Author: Andrew Wang

Andrew Wang

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