Petco’s Quarterly Results Outperform As Digital Sales Boom; Street Sees Over 31% Upside

Petco Health and Wellness Company posted better-than-expected results for the fiscal fourth quarter (ended Jan. 30), driven by digital sales growth of 90%. Shares of the pet health and wellness business operator rose 1.4% in Thursday’s extended trading session after closing 3.8% lower on the day.

Don't Miss our Black Friday Offers:

Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter

Petco’s (WOOF) 4Q adjusted earnings increased 88.9% to $0.17 per share on a year-over-year basis and beat Street estimates of $0.11 per share. Net sales jumped 16% to $1.34 billion and surpassed analysts’ expectations of $1.31 billion.

The company’s comparable sales growth was 17% during the quarter. Additionally, adjusted EBITDA expanded 13% to $148.6 million. (See Petco stock analysis on TipRanks)

Petco CEO Ron Coughlin commented, “On the heels of a successful IPO in January, we closed the year with a strong fourth quarter, and that momentum has carried into 2021.”

For fiscal 2021, the company projects revenues and adjusted earnings to be in the range of $5.25-$5.35 billion and $0.63-$0.66 per share, respectively. Consensus estimates for revenues and earnings are pegged at $5.24 billion and $0.60 per share, respectively.

Following the 4Q results, Wells Fargo analyst Zachary Fadem maintained a Buy rating and a price target of $30 (33.2% upside potential) on the stock.

Fadem believes “today’s print should solidify investor confidence that the Petco growth story remains early days, upside levers are plentiful and ongoing tailwinds (via stimulus, a strong consumer, category growth) remain robust.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 analysts suggesting a Buy and 4 analysts recommending a Hold. The average analyst price target of $29.63 implies a 31.5% upside potential to current levels.