The demand for pet adoption has increased considerably since the onset of the COVID-19 pandemic, as people spend more time at home due to their remote lifestyles. According to American Society for the Prevention of Cruelty to Animals (ASPCA) survey data released earlier this year, one in five households has acquired a cat or dog since the onset of the pandemic. This totals approximately 23 million American households based on the 2019 U.S. Census.
The trend is expected to be sustained in the near term, benefitting pet food companies. Furthermore, according to a Brandessence Market Research report, the global pet food market is expected to reach $188.77 billion by 2027, growing at a 4.1% CAGR.
Given this backdrop, Wall Street analysts expect pet food stocks Chewy, Inc. (CHWY), Petco Health and Wellness Company, Inc. (WOOF), and Freshpet, Inc. (FRPT) to rally by more than 35% in price in the coming months. So, we think it could be wise to add these stocks to one’s watchlist now.
Chewy, Inc. (CHWY)
Together with its subsidiaries, CHWY engages in the pure-play e-commerce business in the United States. The Dania Dania Beach, Fla.-based concern is one of the preeminent sources for pet products, supplies, and prescriptions and provides approximately 70,000 products from 2,500 partner brands.
On September 1, 2021, Sumit Singh, the CEO of CHWY, said, “Customer engagement is growing, and we are confident in our ability to deliver strong results while navigating uncertain market conditions due to the ever-evolving COVID-19 pandemic.”
CHWY’s net sales came in at $2.16 billion for its fiscal second quarter, ended August 1, 2021, up 26.8% year-over-year. Its gross profit was $593.45 million, up 36.9% year-over-year. Also, its adjusted EBITDA came in at $23.27 million, up 50.5% year-over-year.
Analysts expect CHWY’s revenue to increase 26.5% year-over-year to $9.04 billion in its fiscal year 2022. Also, its EPS is expected to grow 416.7% year-over-year in the next year to $0.31. It surpassed EPS estimates in three of the four trailing quarters.
The stock has gained 12.9% in price since hitting its 52-week low of $60.45 on October 12, 2021, to close yesterday’s trading session at $68.26. Wall Street analysts expect the stock to hit $94.15 in the near term, which indicates a potential 37.9% upside.
Petco Health and Wellness Company, Inc. (WOOF)
WOOF operates as a retailer of premium pet consumables, supplies, and companion animals, and services. The San Diego, Calif.-based company has approximately 1,453 pet care centers and 137 full-service veterinary hospitals within pet care centers in the U.S. and Puerto Rico, and 100 pet care centers in Mexico.
On October 28, 2021, WOOF announced the opening of Reddy SoHo, the first concept flagship for Reddy, the company’s premium lifestyle-owned brand for dogs. Nick Konat, WOOF’s Chief Merchandising Officer, said, “This first-of-its-kind boutique will continue fueling that exploration by giving New York City pet parents a hub to bond, recharge, and find the latest must-have gear to style their best lives together.”
WOOF’s net sales came in at $1.44 billion for its fiscal third quarter, ended October 30, 2021, up 14.5% year-over-year. The company’s net income increased 1,450.2% year-over-year to $52.75 million. Also, its gross profit was $594.71 million, representing a 9.8% year-over-year rise.
WOOF’s revenue is expected to be $5.76 billion in its fiscal 2022, representing a 17.1% year-over-year rise. The company’s EPS is expected to increase 214.3% year-over-year to $0.88 in the current year. The stock has surpassed Street EPS estimates in each of the four trailing quarters.
Its shares have gained 7.3% in price since hitting their 52-week low of $17.86 on March 5, 2021, to close yesterday’s trading session at $19.17. Wall Street analysts expect the stock to hit $28.50 in the near term, which indicates a potential 48.7% upside.
Freshpet, Inc. (FRPT)
FRPT, in Secaucus, N.J., manufactures and markets natural fresh meals and treats for dogs and cats in the United States, Canada, and the United Kingdom. It aims to improve the lives of dogs and cats through the power of fresh and natural food.
On November 8, 2021, Billy Cyr, FRPT’s CEO, said, “…The long-term trends driving Freshpet’s growth remain strong, and–thanks to our aggressive capacity expansion initiatives and the investments we made in maintenance, training and automation in Q3–we have never been better positioned to fulfill our mission of ‘changing the way people nourish their pets forever’ than we are today.”
FRPT’s net sales increased 27.8% year-over-year to $107.59 million for its fiscal third quarter, ended September 30, 2021. Its gross profit came in at $41.52 million, up 13.3% year-over-year. And its cash and cash equivalents came in at $170.84 million for the period ended September 30, 2021, compared to $67.25 million for the period ended December 31, 2020.
FRPT’s revenue is expected to increase 38.7% to $442.24 million in its fiscal year 2021. Its EPS is expected to increase 124.5% to $0.12 in the next year. Its stock has gained 2.8% in price since hitting its 52-week low of $105.12 on November 24, 2021, to close yesterday’s trading session at $108.02. Wall Street analysts expect the stock to hit $177.25 in the near term, which indicates a potential 64.1% upside.
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CHWY shares were trading at $67.97 per share on Wednesday afternoon, down $0.29 (-0.42%). Year-to-date, CHWY has declined -24.39%, versus a 23.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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