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On Friday, Stifel analysts adjusted their outlook on Freshpet stock (NASDAQ:FRPT), reducing the price target to $155 from a previous target of $165. Despite the price target cut, the firm maintains a Buy rating on the shares, aligning with the broader analyst consensus of 1.55 (Strong Buy). The adjustment follows Freshpet’s fourth-quarter results for 2024 and the guidance provided for 2025. Stifel’s analysts noted that their sales and adjusted EBITDA estimates from 2025 to 2027 remain largely unchanged, with sales projections slightly below consensus and adjusted EBITDA above consensus. According to InvestingPro data, the company currently has a market capitalization of $5.2 billion and shows strong revenue growth of 27% in the last twelve months.
The analysts at Stifel see the recent drop in Freshpet’s stock price as an opportunity for investors willing to think long-term. They believe that the company’s potential for continued market share gains within the expanding U.S. dog food market, and eventually on a global scale, has not been affected. According to Stifel, the company’s outlook remains promising, supported by InvestingPro’s "GOOD" overall Financial Health score and strong current ratio of 4.42x. InvestingPro analysis indicates the stock is currently trading below its Fair Value, with 14 additional ProTips available for subscribers.
Moreover, Stifel finds the updated adjusted EBITDA margin targets set by Freshpet to be reasonable. The company aims to achieve a 22% adjusted EBITDA margin by 2027 and reach mid-20s percentages over time, building on its current EBITDA of $111.6 million. The analysts expect this will lead to significant free cash flow generation, especially as capital expenditures decrease. With projected sales growth of 24% for FY2025 and a five-year revenue CAGR of 32%, the company appears well-positioned to meet its targets.
Stifel’s commentary underscores their confidence in Freshpet’s strategic goals and financial health. The firm anticipates that the dog food manufacturer will continue to thrive in the market despite the near-term price target adjustment. They suggest that the company’s financial targets are attainable and that Freshpet is positioned well for future growth. For a comprehensive analysis of Freshpet’s valuation, growth prospects, and financial health metrics, investors can access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, Freshpet has reported mixed fourth-quarter results, showing a rise in adjusted EBITDA and net sales, though earnings per share (EPS) fell short of expectations. The company posted a Q4 EPS of $0.36, which was below the forecasted $0.40, and net sales of $262.7 million, slightly missing the anticipated $263.94 million. Despite these results, Freshpet achieved its first year of positive net income with a full-year EPS of $0.94, and net sales for 2024 increased by 27% year-over-year to $975 million. Looking ahead, Freshpet projects 2025 net sales growth between 21% and 24%, with adjusted EBITDA expected to be at least $210 million, surpassing the Bloomberg Consensus estimate of $204.9 million.
Meanwhile, Piper Sandler has adjusted its price target for Freshpet stock to $160 from $180, maintaining an Overweight rating. The firm believes Freshpet’s growth trajectory remains attractive despite current production capacity limitations. In contrast, Citi has revised its price target for Freshpet to $123 from $142, retaining a Neutral rating following Freshpet’s sales shortfall for Q4 2024 and a less optimistic sales growth outlook for 2025. Analyst Thomas Palmer from Citi expressed concerns over Freshpet’s decelerating sales growth but noted potential improvements in EBITDA margins.
Freshpet’s mixed performance has led to varied reactions from analysts. Piper Sandler remains optimistic about the company’s sustainable growth and achievable near-term guidance, while other firms like TD Cowen and Truist Securities have acknowledged the challenges but see potential for margin expansion. Investors seem to be weighing these mixed signals, particularly given the company’s emphasis on managing growth amid supply chain constraints.
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