The COVID-19 pandemic-driven embrace of remote lifestyles heightened interest in pet adoption as homebound individuals yearned for furry companions. With stay-at-home and work-from-home dynamics deepening bonds between pet owners and pets, pet owners are spending generously on pet food products and veterinary services to keep their pets healthy and happy.
The global pet market is expected to reach $241.1 billion by 2026, registering a 5.2% CAGR. A shift in preference to branded pet products, the convenience of e-commerce platforms, and branding by pet suppliers are expected to further propel the industry’s growth.
Hence, Wall Street analysts are optimistic about the growth potential of several quality pet care stocks. Indeed, the Street expects the shares of Freshpet Inc. (FRPT), The Original BARK Company (BARK), and PetIQ, Inc. (PETQ) to rally by more than 30% in price in the coming months.
Freshpet Inc. (FRPT)
FRPT is a Secaucus, N.J.-based pet food company that provides natural, locally sourced, preservative-free and fresh food for dogs and cats. Freshpet Select, Dog Joy, Deli Fresh, Homestyle Creations, Fresh Treats, Vital, Nature’s Fresh, and Dognation are the brands under which the company markets its products. In addition, the company’s Freshpet Kitchens are registered with APHIS and the FDA.
In August, FRPT released its inaugural Environmental, Social, and Governance (ESG) Sustainability report, “Nourishing Pets, People and Planet.” The report articulates the company’s ambition to strengthen the bond between its customers and their pets by offering natural and sustainable pet foods to help them live longer and healthier lives.
FRPT’s net sales for the second quarter, ended June 30, 2021, increased 35.8% year-over-year to $108.62 million. The company’s gross profit increased 27% from its year-ago value to $43.09 million. Its cash and cash equivalents grew 160.2% from the prior-year quarter to $280.32 million in the six months ended June 30, 2021.
Analysts expect FRPT’s revenue for its fiscal year 2021 to be $445.81 million, representing 39.8% year-over-year growth. The company’s EPS is expected to increase by 1,266.7% next year. Furthermore, the stock has gained 17.4% in price over the past year.
Of the seven Wall Street analysts that have provided ratings for the stock, four rated it Buy. Closing yesterday’s trading session at $133.92, the $174.71 average analyst price target represents a 30.5% potential gain.
The Original BARK Company (BARK)
BARK is a dog-oriented company that is headquartered in New York City. It provides personalized food, a box of themed toys and treats, super-tough toys and chews, and dental kits for dogs. BARK Eats, BARK Box, BARK Super chewer, and BARK Bright are the brands under which the company markets its products. BARK operates in two segments, Direct to Consumer and Commerce.
In August, ProShare announced Pet Care ETF would hold BARK because the company has the potential to capitalize on the proliferation of pet ownership and respond to the new trends in the market. This addition to the fund’s holdings will allow investors to gain broad exposure to BARK’s potential growth within the industry.
In July, BARK and the Dunkin’ Joy in Childhood Foundation collaborated for the second time to feature two “pawsome” new dog toys and Dunkin’ themed dog toys with coffee cup, donut, and bag. The dog owners can avail themselves of these limited-edition toys through BARKShop.com. In addition, BarkBox and Super Chewer subscribers could access these toys through Add-to-Box.
For its fiscal first quarter, ended June 30, 2021, BARK’s revenue increased 57.2% year-over-year to $117.61 million. The company’s gross profit increased 48.7% from its year-ago value to $69.79 million. In addition, its quarterly subscription shipments increased 52.4% from the prior-year quarter to $3.6 million. Its gross margin stood at 59.3% for the quarter.
BARK’s revenue is expected to increase 36.7% year-over-year to $708.14 million in the fiscal period ending March 2023. Its EPS is estimated to grow 95% in fiscal 2022 and 33.9% in fiscal 2023. Over the past month, the stock climbed 6.8%. In price.
All three Wall Street analysts that provided ratings for the stock rated it Buy. The $15.33 consensus price target represents a 79.7% potential gain from the last closing price of $8.53.
PetIQ, Inc. (PETQ)
Eagle, Idaho-based company PETQ is one of the leading pet health products companies. PETQ provides pet owners a smarter approach to pet health and creates exceptional value for retailers, manufacturers, and shareholders. PetArmor, Capstar, Sentry, Advecta, Minties, Sergeants, VetIQ, PetAction, CapAction, and PurLuv are the brands under which PETQ sells its products and services.
In April, PETQ established a new $425 million credit facility. As a result, the company received a $300 million loan and a $125 million new asset-based revolving line of credit. For this new credit facility, PETQ partnered with Jefferies Finance LLC and KeyBank National Association. The partnership will decrease its annual interest rate by 125-basis points and support the company by offering financial flexibility and future growth.
PETQ’s total net sales increased 1.5% year-over-year to $271.01 million for the second quarter, ended June 30, 2021. The company’s gross profit increased 41.4% from its year-ago value to $59.63 million. Its operating income increased 346.5% from the prior-year quarter to $16.49 million. PETQ’s net income amounted to $4.03 million for the quarter, versus a $1.45 million net loss in the prior-year period.
For its fiscal year 2021, PETQ’s revenue is estimated to be $889.25 million, representing 14% year-over-year growth. Analysts expect PETQ’s EPS to increase 181.8% next quarter and 64.2% in the current year.
The only Wall Street analyst that provided a rating for the stock rated it Buy. Currently trading at $26.78, the $45 average analyst price target represents a 68 4% potential upside.
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FRPT shares were trading at $132.18 per share on Friday afternoon, down $1.74 (-1.30%). Year-to-date, FRPT has declined -6.91%, versus a 21.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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