Gold is 2025’s best performer. UBS sees more upside
On Thursday, UBS analyst Michael Lasser adjusted the price target for Petco Health & Wellness Co. Inc. (NASDAQ:WOOF) to $3.25, down from the previous $5.50, while maintaining a Neutral rating for the company’s stock. Lasser noted Petco’s recent quarter outperformed its own guidance, indicating a slow but positive rebuild of its track record. The company appears to be shifting focus towards improving profitability and adhering to retail fundamentals rather than prioritizing growth visibility.
Petco demonstrated profitability improvement in the fourth quarter and is expected to achieve double-digit adjusted EBITDA growth in 2025, though current EBITDA stands at $194 million with significant debt of nearly $3 billion. The company has outlined a three-phase plan to address its opportunities for improvement, adopting a multi-faceted approach. According to Lasser, not all of these initiatives need to succeed simultaneously for the company to continue showing progress.
However, Lasser expressed that relying solely on better execution and store closures to generate EBITDA is not a long-term solution. He believes that for Petco to sustain investor confidence, it will eventually need to demonstrate stabilization of its market share. Until such evidence emerges, Lasser anticipates that Petco’s stock will likely trade within its recent price range. InvestingPro analysis reveals 8 additional key investment tips and comprehensive valuation metrics in their detailed Pro Research Report, essential for understanding Petco’s full investment potential.
In other recent news, Petco Health & Wellness Company Inc. reported its Q4 2024 earnings, revealing a mixed financial performance. The company posted a revenue of $1.55 billion, meeting expectations, but reported a negative earnings per share (EPS) of -$0.05, which missed the forecast of $0.00. Despite this earnings miss, Petco’s stock experienced a notable rise in the aftermarket session. Analyst Steven Zaccone from Citi raised Petco’s stock price target to $3.00 from the previous $2.75, maintaining a Neutral rating, citing the company’s focus on cost savings and EBITDA growth. Petco plans to close 20-30 net locations in 2025 as part of its strategic initiatives. The company is also prioritizing the expansion of its fresh frozen pet food category. CEO Joel Anderson described 2025 as a "self-help year," emphasizing internal improvements and operational efficiencies. CFO Sabrina Simmons highlighted efforts to improve gross margins and reduce selling, general, and administrative expenses.
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