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Wedbush Securities added Petco Health and Wellness Company (NASDAQ:WOOF) to its Best Ideas List.
The company’s holistic premium pet care business model is said to be gaining momentum and is seen delivering durable market share gains in the high-growth pet care industry.
Wedbush’s breakdown: “WOOF shares have outperformed the market in 2022, -2.4% YTD vs. -4.6% for the S&P 500, but we see plenty of upside as current price levels value WOOF at just 11.4x 2022E EV/EBITDA, a 12% discount to the average of hardlines peers, creating an attractive entry point for a top-notch retailer in a less-discretionary sector with highly visible and strong growth ahead. The $119b pet care industry should grow at a 7% CAGR through 2025 and we see WOOF driving market share gains through numerous vectors.”
Wedbush notes that there is modest risk to industry and WOOF sales growth from higher inflation and any subsequent steep pullback in consumer spending, they point out that the industry has continued to grow at a mid single-digit pace during past recessions due to its non-discretionary nature and pet humanization trends. WOOF is seen being a resilient standout due to its exposure to higher-spend customers and a $1.4B owned-brands portfolio that cannot be found elsewhere.
The firm has an Outperform rating on Petco (WOOF) and price target of $25.
The Seeking Alpha Quant Rating on WOOF flipped to Buy on March 15.

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