Can Snap compete with Facebook’s Instagram?

PepsiCo's quarterly profit beat estimates as higher pricing of sodas and snack foods in North America paid off.

PepsiCo said on Tuesday that sales in its North America beverage unit, the company's largest, rose 2% to $5.24 billion in the second quarter ended June 17. While volume sales were flat, net pricing was up 1 percent.

PepsiCo and rival Coca-Cola Co have focused on selling smaller, higher-margin packs in developed markets while pulling back on promoting large discount packs as they look to cushion the impact of falling demand for fizzy drinks.

Revenue from PepsiCo's Frito-Lay North America business rose 3%, helped by a 1% rise in volume and a 3% rise in net pricing.

The company said in May it would sell its 4.5 percent stake in British bottler Britvic for an undisclosed amount. Net income attributable to PepsiCo rose to $2.11 billion, or $1.46 per share, from $2.01 billion, or $1.38 per share, a year earlier. Revenue rose 2.1 percent to $15.71 billion.

PepsiCo's shares were little changed in premarket trading on Tuesday.

Elsewhere, Snap Inc shares fell 5.6% on Tuesday, after lead underwriter Morgan Stanley downgraded the stock and raised concerns about the social media company's ability to compete against rival Instagram.

Snap shares were trading at $16.04, after closing below its $17 IPO price for the first time on Monday. The Snapchat owner's market debut in March was the hottest U.S. technology listing in years.

The downgrade comes ahead of the expiry of the stock's lock-up period on July 29.

In an unusual move for an IPO's lead underwriter, Morgan Stanley cut its rating on the Snapchat parent to "equal-weight" from "outperform", and also slashed its price target to $16 from $28.

The brokerage's price target now sits below Snap's median price target of $19.50.

Dipping below an IPO price is seen on Wall Street as a setback to be avoided by chief executives and their underwriters, but it is not uncommon for Silicon Valley companies.

Snapchat has gained popularity among people under 30, but many on Wall Street have been critical of Snap's lofty valuation and slowing user growth.

The company faces increasing competition from Facebook, which once made a $3 billion bid for Snapchat. The social media giant has made the camera a central piece of its apps and offers features similar to Snap on its platforms, including Instagram and WhatsApp.

In June, Instagram said its Stories feature had 250 million users, compared with 166 million users for Snapchat at the end of the first quarter.

"We have been wrong about Snap's ability to innovate and improve its ad product this year and user monetization as it works to move beyond 'experimental' ad budgets into larger branded and direct response ad allocations," Nowak said in the note.

Morgan Stanley cut its estimates for Snap's 2017 revenue by 6.9 percent to $897 million, and daily active user expectations by 1.6 percent to 182 million. Goldman Sachs, another lead underwriter, still has a "buy" and an unchanged $27 price target.