PEP is undervalued at $140 vs $177 fair value; 27% upside expected in 12-18 months despite near-term sales/profit pressure from macro headwinds and health-conscious consumers.

PepsiCo is another undervalued stock that is not linked to artificial intelligence. The fair value I calculated for PepsiCo is $177, and given the current market price of $140, I calculated a 27% upside for Pepsi over the next 12 to 18 months.

This is a rare low valuation for a relatively safe company with stable sales and profits. Of course, one of the most optimistic factors, and the thing that makes me most optimistic about PepsiCo, is its own experience.

This is a business that is difficult to manage. You have to work with distributors, you have to work with suppliers, you have to deal with manufacturing, you have to be very good at marketing, and you have to bring all of that together on a large scale around the world.

This is a difficult thing to do. PepsiCo has been successful in managing this for decades and has demonstrated skill in this regard for decades with continuous improvements. That exclusive knowledge and experience is one of the main reasons for my optimism about PepsiCo stock and one of the reasons why it is rare to find this stock at a low price.

But the reasons why you can get Pepsi at a low price right now are due to strong downward factors affecting the business, most notably the macroeconomic headwinds, which are numerous.

From increased trade barriers to the war in Iran causing higher oil and commodity prices, reducing discretionary consumption budgets, all of this is lowering PepsiCo's near-term sales and profit forecasts.

The second downside factor is consumers choosing healthier options, and this works against PepsiCo in the near term because the range of products it sells, between its sugary drinks and salty snacks, are not entirely healthy choices.

Now, the company can shift to healthier options. PepsiCo's core expertise is not limited to selling salty snacks or sugary drinks; Logistics capabilities, manufacturing capabilities, distribution network, relationships with distributors, and marketing effectiveness can be applied to healthier choices.

But it will take time, and this transition could be messy and lead to fluctuations in the company's sales and profits, which is certainly a downside factor at the moment.