RBC Capital Markets Initiates Coverage On This 'Well Positioned' Pet Company

  • RBC Capital Markets initiated Petco Health and Wellness Company Inc WOOF with an Outperform rating and a $17 price target. 
  • The analyst believes the company is well positioned to take a share of the fast-growing U.S. pet category with its revised company strategy, structurally advantaged real-estate portfolio, and vet expansion opportunity. 
  • Earnings are expected to compound with topline growth and see modest room for multiple expansions.
  • Also read: Petco Health Disappoints With Smaller Than Expected Q2 Profits, Annual Guidance.
  • Petco reshuffled its management and revised its go-forward strategy, attracting younger, higher-income consumers. 
  • The analysis of population demographics within 2, 5, and 10 miles of Petco and PetSmart stores showed that Petco stores are, on average, surrounded by more higher-income individuals.
  • RBC estimates that opening 70 vet hospitals per year could result in a ~7% lift to total company net sales over five years (or 170 bps annually). 
  • Petco expects a four-wall hospital EBITDA margin at 5-year maturity to sit at around ~20%, well above current enterprise levels.
  • Price Action: WOOF shares are up 5.21% at $15.26 on the last check Wednesday.
Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorNewsHealth CarePrice TargetInitiationAnalyst RatingsMoversTrading IdeasGeneralBriefs
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!