On Friday, RBC (TSX:RY) Capital adjusted its outlook on Petco Health & Wellness Co. Inc. (NASDAQ: WOOF), reducing the price target to $2.70 from the previous $3.50, while maintaining an Outperform rating on the stock. The firm's analysis suggests that the fundamental situation for Petco has not significantly changed, implying there may not be an immediate need to acquire shares in the company.
The analyst from RBC Capital noted that despite the unchanged fundamentals, the investment scenario for Petco could be becoming more intriguing. Factors contributing to this perspective include tempered expectations, the appointment of a new CEO, and the possibility of a favorable shift in the company's profit margins if economic conditions begin to stabilize.
In terms of financial forecasts, RBC Capital has revised its full-year 2024 net sales estimate for Petco to a decline of 1.6%, a slight adjustment from the previously anticipated 0.8% decrease. The adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) expectation for the same period has been modified to $301 million, down from the earlier estimate of $372 million.
Looking ahead, RBC Capital has introduced its projections for fiscal year 2025, anticipating a 3.5% increase in net sales and an adjusted EBITDA of $338 million. The new price target of $2.70 is based on approximately 6.5 times the firm’s adjusted EBITDA estimate for FY 2025.
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