Citi cuts Freshpet stock price target to $123 from $142

On Thursday, Citi analyst Thomas Palmer revised the price target for Freshpet stock (NASDAQ:FRPT) to $123, down from the previous target of $142, while maintaining a Neutral rating on the company’s shares. The adjustment follows Freshpet’s report of a sales shortfall for the fourth quarter of 2024 and a sales growth forecast for 2025 that fell short of market expectations. According to InvestingPro data, the stock’s RSI suggests oversold territory, while the company maintains strong fundamentals with a current ratio of 4.72, indicating robust liquidity.

Freshpet’s shares experienced a 17% decline on the day of the announcement, as the market reacted to the company’s fourth-quarter sales miss and a less optimistic sales growth outlook for 2025 compared to the Visible Alpha consensus. Despite the recent decline, InvestingPro analysis shows the company achieved impressive revenue growth of 29.36% in the last twelve months, with total revenue reaching $927.89 million. Analyst Palmer acknowledged the reasons for concern, noting that Freshpet’s sales growth has decelerated more rapidly than anticipated, particularly for the first quarter of 2025. This deceleration could necessitate a significant increase in sales to achieve Freshpet’s ambitious $1.8 billion sales target by 2027.

Despite these challenges, Palmer expressed optimism regarding Freshpet’s EBITDA margin performance and the management’s strategy to further improve these margins in the coming years. He also identified potential factors that could lead to a resurgence in organic sales growth in subsequent years.

With these considerations in mind, Palmer’s stance on Freshpet stock remains Neutral. He recognized an increased potential for the company’s earnings but believed that the slower top-line growth might justify lower valuation multiples. The revised price target reflects this balanced view of Freshpet’s financial prospects.

In other recent news, Freshpet reported its fourth-quarter earnings, revealing mixed results that did not fully align with analyst expectations. The company announced earnings per share of $0.36, which, while an improvement from the previous year, fell short of the anticipated $0.42. Freshpet’s revenue for the quarter was $262.7 million, slightly below the expected $264.3 million. Despite these shortfalls, the company did see a notable increase in adjusted EBITDA, up 68% year-over-year to $52.6 million, surpassing the $47.6 million estimate.

For the full year 2024, Freshpet achieved net sales of $975 million, marking a 27% increase from the previous year. Looking forward, the company projects 2025 net sales between $1.18 billion and $1.21 billion, with an adjusted EBITDA target of at least $210 million. Analysts have offered varied opinions on Freshpet’s outlook, with Piper Sandler expressing optimism about growth potential, while TD Cowen noted the weaker sales growth but suggested the market was somewhat prepared for it. Truist Securities expects Freshpet to exceed its conservative margin expansion outlook for 2025, while William Blair highlighted the strong earnings quality.

Additionally, Freshpet plans capital expenditures of approximately $250 million for the upcoming year, which is higher than previous estimates. The company continues to focus on managing growth to navigate supply chain challenges, aiming to maintain robust performance and capitalize on market opportunities.

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