Freshpet Is One Hot Growth Ticket
Over the past few months, we here at Marketbeat grew wary of Freshpet (NASDAQ:FRPT). Not because the pet food industry is at risk, or because American’s don’t want to feed their pets good food, but because the shelves seemed to be empty. Everywhere we went the Freshpet refrigerated cases were empty. The good news is that there was no need to worry. The cases weren’t empty because of internal problems, at least not the bad king. The cases are empty because demand is so high Freshpet can’t keep them filled.
“Clearly, our 'Feed the Growth' strategy is working and is proving that the upside potential for Freshpet continues to grow," commented Billy Cyr, Freshpet's Chief Executive Officer. "If we simply continued the rate with which pet parents have joined the Freshpet franchise over the past two years, we would greatly exceed our 2025 goal of having 8 million households feeding Freshpet to their pets. So, we are raising our 2025 household penetration target by 37% to 11 million households and in pursuit of that goal we will get the opportunity to satisfy millions more pets and pet parents. That will also enable us to raise our 2025 net sales target to $1.25 billion. To meet that higher demand, we are accelerating and increasing our capacity expansion plan.”
Freshpet Delivers In-Line Results
Freshpet delivered revenues that were only in-line with expectations but that shouldn’t be a surprise. When the company is operating at full capacity and the shelves are clear of the product it’s pretty to simple to do the math. That said, the $84.52 million in revenue is up 28.5% from last year, is an acceleration over last year’s 27% YOY growth, and will be topped again in 2021. For the full-year, Freshpet produced a 29.7% increase in revenue that will also be topped in the coming year to set both a new record annual revenue as well as growth rate.
Moving down to the bottom line things are a little less rosy but there is a takeaway. The ($0.08) loss missed the consensus by $0.16 but is an improvement over last year and mitigated by expansion plans. The company is spending its cash on expansion to help keep up with demand and fuel accelerating growth.
The company’s guidance for the year is stellar as well. Execs are forecasting revenue to exceed $430 million and grow more than 35% YOY. Bottom line results will be equally good if impacted by ongoing expansion plans. The company is expecting EBITDA to top $61 million and grow in excess of 30% YOY.
Why Did Freshpet Shares Fall After Blow Out Report
Shares of Freshpet fell hard in the days before and just following the Q4 report because of a value-diluting offering by the board. The company is adding a $300 million dollar follow-on offering for shares that, in the near-term, negatively impact shareholder value but, in the long-term, provide capital to fuel growth not tied to the debt-market. In our view, this is providing another opportunity for entry into what is turning out to be one of the hottest trends in consumer goods today.
The Technical Outlook: Buy The Dip In Freshpet
Shares of Freshpet are in a very strong, long-term uptrend and that trend is far from over. Today’s drop in prices has only brought the action down to the trend line and is already showing support. The price action will likely remain weak over the next few weeks but, so long as support along the trend line isn’t broken and confirmed as resistance, upward bias is expected. Longer-term, this stock can be expected to consolidate at or near the current levels with an upward bias in price action that will eventually retest the all-time highs and move up to set new all-time highs.
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