CTAs are almost max long in equities, have very limited room to buy: UBS
On Thursday, Citi analyst Steven Zaccone adjusted the price target for Petco Health & Wellness Co. Inc. (NASDAQ: WOOF), increasing it to $3.00 from the previous $2.75, while maintaining a Neutral rating on the stock. Zaccone noted that Petco delivered a solid fourth-quarter performance, surpassing modest expectations.
The company’s financial strategy for the fiscal year 2025 appears to prioritize cost savings, EBITDA growth, and cash flow over sales growth. The new CFO of Petco, Sabrina Simmons, expressed confidence in the company’s ability to identify cost-saving opportunities and streamline operations, highlighting a variety of options to enhance gross margin and reduce selling, general, and administrative expenses (SG&A).
Zaccone pointed out that fundamental retail principles are being used as the main mechanisms for cost reduction. This strategic focus is anticipated to provide a temporary boost to Petco’s stock, known as a relief rally. However, the analyst also mentioned the challenges Petco may face in increasing sales and regaining market share in a highly competitive industry.
The report concluded with the analyst’s decision to slightly raise EBITDA estimates for Petco and adjust the price target based on an approximate 4.5 times the forecasted FY26 EBITDA. Despite the price target increase, the analyst’s stance remains Neutral, suggesting a wait-and-see approach to the stock’s future performance amidst the company’s cost-saving measures and industry competition.
In other recent news, Petco Health and Wellness Company Inc (NASDAQ:WOOF) reported its Q4 2024 financial results, revealing a mixed performance. The company achieved revenue of $1.55 billion, meeting expectations, but reported a negative earnings per share (EPS) of -$0.05, missing the forecasted $0.00. Despite this earnings miss, Petco’s stock experienced a significant aftermarket rally. The company plans to close 20-30 net locations in 2025 as part of its strategy to optimize operations. Petco is also focusing on expanding its fresh frozen pet food category to enhance its product offerings. Analysts have not provided specific upgrades or downgrades, but the company remains under scrutiny for its strategic plans moving forward. Petco’s leadership emphasized a focus on internal improvements, with CEO Joel Anderson describing 2025 as a "self-help year" for the company. The company projects adjusted EBITDA for 2025 to be between $375 million and $390 million, indicating a focus on stabilizing profitability and improving operations.
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