It was a huge day, seemingly out of nowhere, for pet supply company Petco (NASDAQ:WOOF). Petco was up over 25% in Thursday afternoon’s trading, though most of the reasoning behind the surge seems connected to short selling. That and a substantial quantity of insiders looking to buy in on the company they work for certainly didn’t hurt.
Petco, or Petco Health and Wellness Company, shot up after word emerged that Executive Chairman Glenn Murphy was buying big, landing a million restricted share units. This was part of an “equity incentive plan,” reports noted, and Murphy wasn’t alone. Cameron Brietner, part of the board of directors, also bought in, dropping well over $2 million to pick up 750,000 shares at $3.14 per share on average.
All this came at the same time that major new short interest came to light: short interest is currently at 37.2% of total float, reports noted, which is driving further swings in volatility.
And Right After an Executive Shakeup, Too
The immediate cause of all this interest might be the recent move to bring in new leadership in Petco’s Stores division, bringing in James Roth to take over store matters. Given that Roth has substantial retail experience, he may well have some plans to pick up sales at struggling pet supply stores. However, that doesn’t quite seem like the kind of thing that would fuel such impressive growth.
Assessments of potential profitability are largely mixed, and its operating margin is only better than about a third of its industry peers. It’s clear, though, that someone expects Petco to take off in a big way and is buying in accordingly.
Is Petco a Good Stock to Buy?
Turning to Wall Street, analysts have a Hold consensus rating on WOOF stock based on two Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 48.69% loss in its share price over the past year, the average WOOF price target of $2.64 per share implies 31.25% downside risk.
