PEP - Keurig Dr Pepper: Selling Calls Can Yield 7% With Room For Upside

2024-07-02 05:29:22 ET

Summary

• Dr Pepper has been steadily gaining market share over the last few years, supported by a wider distribution strategy and strong brand investments.
• This progress is a microcosm of Keurig Dr Pepper, the parent company, which has grown top and bottom-line results rapidly since coming public in 2018.
• KDP shares are also attractively valued on a historical basis.
• We think the best way to play the stock is by opening a covered call position on KDP. This trade stands to return 16% over a year in a best-case scenario (with minimal risk).
• We rate KDP a 'Buy'.

Something momentous happened recently in the soda world that you may have missed: Dr Pepper passed Pepsi as the second favorite soda brand in the United States .

This comes following decades of dominance by the two large industry incumbents, Coke ( KO ) and Pepsi ( PEP ):

For further details see: