Jefferies lifts Freshpet stock rating, cuts price target to $150

On Monday, Freshpet (NASDAQ:FRPT) stock (market cap: $4.89 billion) received an upgrade from Jefferies, moving from a Hold to a Buy status, although the firm reduced the price target to $150 from $155. The revision comes as shares trade at $100.28, down 32.29% year-to-date, in contrast to the company’s robust fourth-quarter performance and optimistic future projections. According to InvestingPro data, the stock is currently trading near its 52-week low of $90.07. Jefferies analysts highlighted the persistent strength in the pet premiumization trend and a general improvement within the pet industry. They anticipate Freshpet’s sales to grow at a compound annual rate of 23% through 2027, coupled with expanding profit margins—a combination they consider rare.

Jefferies’ analysis underscores the valuation of Freshpet stock as being at a five-year low. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, while technical indicators show the stock is in oversold territory. Despite the price target reduction, the firm believes that the stock has the potential to climb 50% above its current trading value. Want deeper insights? InvestingPro offers comprehensive analysis with 18 additional ProTips for Freshpet. The analysts’ positive outlook is rooted in the company’s strong quarterly results and the promising trends within the broader pet industry, which they expect to drive sales and margins higher over the next few years.

Freshpet’s performance in the fourth quarter has been a bright spot, indicating resilience and growth potential, with impressive revenue growth of 27.16% over the last twelve months. The company’s ability to navigate a challenging market environment this year has caught the attention of analysts, leading to the upgraded rating. With a gross profit margin of 40.6% and strong liquidity position (current ratio: 4.42), the company demonstrates solid financial fundamentals. Jefferies’ stance reflects confidence in Freshpet’s business model and market position, suggesting that the stock’s current price does not fully reflect its intrinsic value.

The pet industry’s favorable dynamics, including the trend of pet premiumization, where consumers are willing to spend more on high-quality pet products, are seen as key drivers for Freshpet’s future growth. The firm’s expectation of a compound sales increase of 23% into 2027 is indicative of the robust demand anticipated for premium pet products.

In conclusion, Jefferies’ revised outlook for Freshpet stock, with an upgraded rating to Buy and a new price target of $150, is based on the company’s solid quarterly results, the strength of the pet premiumization trend, and an improving pet industry landscape. For a complete analysis of Freshpet’s potential, including detailed financial metrics and expert insights, check out the comprehensive Pro Research Report available exclusively on InvestingPro. Despite the recent drop in share price, analysts at Jefferies believe that Freshpet is positioned for significant growth and margin expansion in the coming years.

In other recent news, Freshpet announced mixed fourth-quarter results, with adjusted EBITDA rising 68% year-over-year to $52.6 million, surpassing estimates, while net sales increased 22% to $262.7 million, slightly below expectations. The company’s earnings per share came in at 36 cents, falling short of the anticipated 42 cents. Freshpet’s sales forecast for 2025 also missed market expectations, prompting a series of analyst revisions. Citi adjusted its price target for Freshpet to $123, maintaining a Neutral rating due to concerns over decelerating sales growth. Meanwhile, TD Cowen cut its target to $141 but upheld a Buy rating, noting that the market’s reaction to slower growth may be excessive.

Stifel reduced its price target to $155, maintaining a Buy rating, and expressed confidence in Freshpet’s strategic goals and financial health. Piper Sandler also lowered its target to $160, keeping an Overweight rating, and highlighted Freshpet’s attractive growth trajectory despite production capacity limitations. Analysts have mixed views on Freshpet’s performance and outlook, with some expressing optimism about the company’s ability to achieve its EBITDA targets and improve profit margins. Freshpet’s management has outlined plans to achieve a 22% adjusted EBITDA margin by 2027, which analysts believe could lead to significant free cash flow generation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.