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QQQ   283.31 (-1.51%)
AAPL   144.74 (-1.29%)
MSFT   246.77 (-1.37%)
META   115.34 (-5.79%)
GOOGL   97.27 (-2.22%)
AMZN   89.37 (-1.80%)
TSLA   178.99 (-1.90%)
NVDA   160.83 (-3.17%)
NIO   13.15 (+2.73%)
BABA   91.70 (+1.30%)
AMD   71.20 (-3.29%)
T   19.00 (+1.33%)
MU   54.41 (+0.68%)
CGC   3.72 (-13.89%)
F   13.22 (-1.20%)
GE   85.29 (+0.74%)
DIS   93.65 (-2.38%)
AMC   6.97 (-6.44%)
PYPL   72.44 (-1.60%)
PFE   49.77 (-1.89%)
NFLX   306.09 (-2.08%)
QQQ   283.31 (-1.51%)
AAPL   144.74 (-1.29%)
MSFT   246.77 (-1.37%)
META   115.34 (-5.79%)
GOOGL   97.27 (-2.22%)
AMZN   89.37 (-1.80%)
TSLA   178.99 (-1.90%)
NVDA   160.83 (-3.17%)
NIO   13.15 (+2.73%)
BABA   91.70 (+1.30%)
AMD   71.20 (-3.29%)
T   19.00 (+1.33%)
MU   54.41 (+0.68%)
CGC   3.72 (-13.89%)
F   13.22 (-1.20%)
GE   85.29 (+0.74%)
DIS   93.65 (-2.38%)
AMC   6.97 (-6.44%)
PYPL   72.44 (-1.60%)
PFE   49.77 (-1.89%)
NFLX   306.09 (-2.08%)
QQQ   283.31 (-1.51%)
AAPL   144.74 (-1.29%)
MSFT   246.77 (-1.37%)
META   115.34 (-5.79%)
GOOGL   97.27 (-2.22%)
AMZN   89.37 (-1.80%)
TSLA   178.99 (-1.90%)
NVDA   160.83 (-3.17%)
NIO   13.15 (+2.73%)
BABA   91.70 (+1.30%)
AMD   71.20 (-3.29%)
T   19.00 (+1.33%)
MU   54.41 (+0.68%)
CGC   3.72 (-13.89%)
F   13.22 (-1.20%)
GE   85.29 (+0.74%)
DIS   93.65 (-2.38%)
AMC   6.97 (-6.44%)
PYPL   72.44 (-1.60%)
PFE   49.77 (-1.89%)
NFLX   306.09 (-2.08%)

Two Pet Health Stocks To Watch And One To Avoid 

Two Pet Health Stocks To Watch And One To Avoid 

Pet Health Is Still A Growth Market 

Growth stocks have been getting pummeled this year due to fears of slowing growth, tightening margins, and recession but in some cases, the baby is getting tossed out with the bathwater. In this case, it’s more like the puppies and kittens are getting tossed out with the bathwater but the meaning is the same. Pet Health, estimated at $11 billion in 2021, is growing at a high-single-digit CAGR and it is expected to be resilient in the face of inflation and shifting consumer habits. In this light, we think the recent valuations on names like Petco Health And Wellness Company And Chewy are too good to pass up. 

Petco Health And Wellness Navigates Inflation 

Needham issued an update on Petco Health And Wellness (NASDAQ: WOOF) in early June following a meeting with management. Management told them that not only were they able to successfully pass price increases through to their customer base but they saw little to no evidence consumers were trading down. This is significant news for the pet care industry due to the fact premiumization of products like food and care items is a driver of growth and bottom-line results. Needhan carries a Buy rating on the stock with a price target of $30 compared to the broader consensus of Hold and $21.58. That target implies about 50% of upside for the stock with another almost 50% implied by the Needham target. 

Price action in Petco Health And Wellness hit a new low prior to the Q2 earnings report issued in late May. The price action bottomed in the wake of the report and is now retesting support at the key level of $14.60. Assuming this level holds as support, we expect to see the short-sellers begin covering as well and that (about 22% short interest) could lead stocks up to the $17.80 level very quickly.

Two Pet Health Stocks To Watch And One To Avoid 

Chewy Gets Upgraded, Twice 

Chewy (NASDAQ: CHWY) was recently upgraded not once but twice adding strength to the idea these stocks are deeply undervalued. The upgrades come from Needham and Wedbush which both raised their ratings from Neutral to Outperform/Strong Buy with price targets in line with the Marketbeat.com consensus. The consensus is expecting about 50% of upside for the stock citing inelasticity in the industry and the prospect of widening margins as costs come down. 

Shares of Chewy are also suffering from short-selling but the short-covering has already started. The stock put in a bottom in late May/early June and it appears to be in reversal. The price action still needs to get above resistance at the $40.60 level but we don’t think it will be hard. The company next reports earnings at the end of August and should be able to easily outpace the current consensus estimate of $2.45 billion in revenue. 

Two Pet Health Stocks To Watch And One To Avoid 

Petmeds Is Late To The Game 

Petmeds (NASDAQ: PETS) was among the first pet health companies to go public but it is one of the last to embrace omnichannel selling and an expanded product line. That shortfall is costing the company in more ways than one and has resulted in dwindling sales even while its peers and the industry are growing. And don’t be fooled by the dividend, either. The company says it is committed to paying the dividend but it doesn’t look very safe to us at 6% of the share price and more than 100% of the earnings. 

Two Pet Health Stocks To Watch And One To Avoid 

Should you invest $1,000 in Petco Health and Wellness right now?

Before you consider Petco Health and Wellness, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Petco Health and Wellness wasn't on the list.

While Petco Health and Wellness currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Petco Health and Wellness (WOOF)
3.1569 of 5 stars
$10.71-2.5%N/A33.47Moderate Buy$15.44
PetMed Express (PETS)
2.8051 of 5 stars
$19.45-0.1%6.17%24.94Hold$25.00
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

Contributing Author: Technical and Fundamental Analysis

Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.
Contact Thomas Hughes via email at tmhughes.writeon@gmail.com.