Big Upgrade Has Beverage Stock Bubbling

BMO thinks KDP's valuation is cheap compared to its sector peers

Managing Editor
Jun 17, 2019 at 9:43 AM
facebook twitter linkedin


The shares of Keurig Dr Pepper Inc (NYSE:KDP) are up 2.7% to trade at $29.40 this morning, after BMO upgraded the beverage maker to "outperform" from "market perform." While also raising its price target to $34 from $27, the analyst in coverage glowed about the company's valuation, calling it a discount to Keurig's non-alcohol sector peers.

Keurig Dr Pepper stock is currently a chip-shot from its May 15 all-time high of $29.76. KDP has traded within a tight range for most of 2019, with the $26 level serving as a floor and the overhead $30 area keeping a tight lid on breakouts. Year-over-year, the shares are up 47.4%.

For a stock that's performed pretty well, its surprising to see so many analysts remain in the bearish camp. Of the 15 brokerages covering KDP, 10 rate it a "hold" or sell. Plus, the consensus 12-month price target of $29.88 is a modest 4.4% premium to Friday's closing perch of $28.63. This means that more upgrades and/or price-target hikes could vault the equity higher in the short term. 

A short squeeze could also provide some tailwinds for the equity. Short interest increased by almost 7% in the two most recent reporting periods to 18.30 million shares, a record high. This accounts for a healthy 6.9% of KDP's total available float, and nearly eight days' worth of pent-up buying power, at the stock's average pace of trading.

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial
 


 


 
Special Offers from Schaeffer's Trading Partners