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Investing.com - UBS maintained its Neutral rating and $3.25 price target on Petco Health & Wellness Co. Inc. (NASDAQ:WOOF) ahead of the pet retailer’s upcoming second-quarter earnings report.
The investment firm noted that the quarterly results will be "an important one for the stock" as Petco’s ongoing transformation remains central to investor discussions about the company. With revenue declining 2.37% over the last twelve months and a gross margin of 38.08%, the $938.79 million market cap retailer faces significant challenges. InvestingPro subscribers can access 7 additional key insights about Petco’s financial health and growth prospects.
UBS cautioned that market patience with Petco’s transformation efforts may be limited, suggesting that if second-quarter results mirror the first quarter’s performance, the stock could face negative pressure.
While Petco has clearly communicated its willingness to sacrifice sales growth to improve profitability, UBS believes the company will eventually need to demonstrate it can stabilize market share amid strong competition.
The firm emphasized that transformation initiatives "take time and don’t necessarily move in a linear fashion," but indicated Petco needs to show it is building a foundation for future sales growth.
In other recent news, Petco Health & Wellness Co. Inc. reported its first-quarter 2025 earnings, which fell short of forecasts. The company posted an earnings per share (EPS) of -$0.04, missing the anticipated -$0.02, and revenue came in at $1.5 billion, below the projected $1.55 billion. Despite these misses, Petco’s stock saw a slight increase in after-hours trading. BofA Securities analysts raised their price target for Petco to $2.50 from $2.10, citing improved EBITDA performance, although they maintained an Underperform rating. Petco’s first-quarter adjusted EBITDA was $89.4 million, surpassing both BofA’s expectation of $83 million and the Street’s estimate of $82 million. Net sales for the company showed a decline of 2.3% year-over-year, with comparable store sales dropping 1.3%. Meanwhile, Citi maintained its Neutral rating on Petco with a $4.00 price target, noting a recent rally in the stock. In related developments, S&P Global Ratings upgraded Woof Intermediate Inc., also known as Wellness Pet, to ’CCC+’ after a debt restructuring, despite a previous downgrade due to a distressed debt exchange.
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