Freshpet: A Clear Show Me Story For 2016

• Canaccord analyst Mark Sigal reiterated a Buy rating on Freshpet Inc FRPT on Tuesday.
• However, the analyst fine-tuned his estimates after the ICR conference, and consequently trimmed his price target on the stock from $11 to $9.
• Shares of Freshpet were trading down more than 4.2 percent on Tuesday afternoon.

In a report issued Tuesday, Canaccord analyst Mark Sigal reiterated a Buy rating on shares of Freshpet, on the belief that the company is distinctively positioned in the emerging natural pet food market and poised to increase its share via an “expanding portfolio of on-trend, premium-quality products, growing distribution, and a differentiated position that controls its shelf space.”

However, the firm believes that, in order for sentiment and momentum to reverse, the company needs “a re-acceleration in door growth and solid fridge velocities.” The experts left Freshpet’s presentation at the ICR conference expecting “more modest” growth in these categories.

A ‘Show Me’ Story For 2016

Freshpet has experienced declines in door growth and fridge productivity recently. While the tumble in productivity is a partial reflection of a lack of advertising spend in the fourth quarter of 2015 -- consistent with historical seasonal patterns, the analysts “do expect productivity growth to re-accelerate in Q1 on a resumed ad spend and further contribution from innovation (shreds and fresh baked),” the note assured.

Of note, their expectations “discount a return to the 2,000 door/year guidepost in 2016,” and while they “remain steadfast in the long term opportunity, Freshpet remains a clear show me story” for Canaccord.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.