On Friday, RBC (TSX:RY) Capital adjusted its outlook on Petco Health & Wellness Co. Inc. (NASDAQ:WOOF) shares, raising the price target to $3.00 from the previous $2.70. The firm has maintained an Outperform rating on the company's stock. This adjustment follows Petco's first-quarter results, which surpassed the company's own guidance.
The first quarter's performance is seen as a positive step for Petco in regaining market trust. With the pet industry showing signs of stabilizing, the introduction of a new Executive Chairman, and the anticipation of a new CEO, the situation appears favorable for the company. These developments have prompted RBC Capital to revise their expectations for the company's future performance.
RBC Capital has updated its forecast for Petco's comparable sales growth, now expecting an increase of 0.7% for fiscal year 2024 and 3.2% for fiscal year 2025. These figures are slightly adjusted from the previous estimates of 0.3% and 3.6% growth, respectively.
Additionally, the firm has raised its adjusted EBITDA predictions for the company to $330 million for fiscal year 2024 and $370 million for fiscal year 2025, up from the prior estimates of $301 million and $340 million.
The new price target of $3.00 is based on approximately 6.5 times the revised fiscal year 2025 adjusted EBITDA estimate of $370 million. This price target uplift reflects the analyst's optimistic view of Petco's potential to improve its financial standing and market position in the coming years.
InvestingPro Insights
Recent data and analysis from InvestingPro provide a detailed look into Petco Health & Wellness Co. Inc.'s (NASDAQ:WOOF) financial health and market performance. With a significant return over the last week of 27.31% and an even more impressive month-long surge of 103.21%, the company's stock has shown remarkable short-term growth. This aligns with the optimism voiced by RBC Capital, as the company's market cap stands at $858.41M. Despite this, it's important to note that Petco operates with a significant debt burden and analysts do not anticipate the company will be profitable this year.
InvestingPro Tips highlight that while 6 analysts have revised their earnings upwards for the upcoming period, the stock is currently in overbought territory according to the RSI, and it trades with high price volatility. These factors could indicate potential risks for investors despite the recent positive trends. For those looking to delve deeper into Petco's financial metrics and stock performance, InvestingPro offers additional insights. To access these insights and benefit from the full suite of features, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Investors may also find the InvestingPro Fair Value estimate of $3.33 USD noteworthy, which slightly exceeds the analyst target of $3.00 USD. This suggests that the stock might have room for a modest upside based on current valuations. With a P/E Ratio of -0.58 and a Price / Book ratio of 0.74 for the last twelve months as of Q1 2025, the company's valuation metrics present a mixed picture that warrants careful consideration. For more comprehensive analysis and a total of 14 InvestingPro Tips related to Petco, interested investors can explore https://www.investing.com/pro/WOOF.
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