Shares of the pet food maker Freshpet (NASDAQ:FRPT) spiked after activist investor Jana Partners disclosed a 9.6% stake in the company. Jana has a reputation for investing in undervalued stocks, bumping up the share price with its turnaround strategies, and later putting up the company for sale to bigger rivals. This indicates that FRPT could soon be an acquisition target.
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In an SEC filing, Jana Partners stated that they acquired FRPT stock as they believed it to be undervalued, which presents an attractive opportunity for buying. Notably, FRPT stock closed about 16% higher following the disclosure. However, it is still down about 52% year-to-date.
While FRPT stock has lost considerable value, it continues to deliver stellar revenue due to solid demand. Its revenues grew by 37.7% in the first half of this year. Further, the company expects full-year sales to grow by 35%, driven by higher volumes and pricing.
Is FRPT a Good Stock to Buy?
Freshpet’s strong sales, ability to increase pricing, and growing household penetration imply that consumers continue to spend on pet food and products. However, analysts are cautiously optimistic about FRPT, given high inflation and internal operating challenges.
FRPT stock has received 12 Buys, two Holds, and one Sell for a Moderate Buy consensus rating. Further, FRPT’s average price target of $69.85 implies upside potential of 53.6%.
Freshpet also has positive indicators from hedge funds and retail investors. Hedge funds bought 103.8K of FRPT stock in the last three months. Meanwhile, TipRanks’ data shows retail investors increased their exposure to FRPT stock by 2.2% in the last 30 days. Overall, FRPT has a Neutral Smart Score of six out of 10.
Bottom Line
Freshpet’s solid sales, upbeat guidance, and substantial decline in its share price make it an attractive investment. Further, Jana’s stake in the company indicates that FRPT stock could see higher levels. However, headwinds from inflation and near-term operating challenges could continue to hurt its profitability.
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