Investors should be confident that the adoration of pet owners for their animals will not diminish anytime soon.
Statistics demonstrate that pets are becoming essential members of our households, which bodes well for businesses catering to pet owners.
Therefore, investors should consider adding some “pet stocks” to their portfolios. According to Simeon Hyman, director of ProShares’ investment strategy department, “we know that there are more pets than children, and we know that everyone acquired a pet in the epidemic.” Concerns about the economy won’t be reflected in the price of pets, though.
According to Debbie Wang, senior analyst at Morningstar, certain pet enterprises are profiting from pet owners’ increasing pampering of their animal buddies via pricey therapies and other lifestyle adjustments. So do we now have another recession-proof market?
If your cat could give her opinion, these three pet equities are the most excellent bets for 2022.
Chewy.com, Inc. (CHWY)
Using its e-commerce platform, Chewy offers pet food and accessories to customers directly. Morningstar equities analyst Sean Dunlop claims that the founders of Chewy saw an opportunity to compete with Amazon.com Inc. (AMZN) in a space “rife with inefficiencies.”
Hyman also notes that 72% of Chewy’s entire income comes from autoship revenue or money received through automatic subscriptions for commonly purchased products. In addition, since there are fewer split shipments with a high autoship penetration, inventory management is simplified, allowing the firm to ease fulfillment cost constraints compared to its bigger counterparts, as stated by Dunlop.
During an earnings call for Q1 on June 1, CEO Sumit Singh noted that Chewy’s “value offer is as appealing as ever.” CFO Mario Marte said on the same call that the business “continues to perform in the face of exceptional macro turbulence to generate strong top-line growth and rising sequential profitability.”
Petco Health & Wellness (WOOF)
Nearly 1,500 sites in North America make Petco Health & Wellness a one-stop shop for pet owners, providing access to veterinarian services, grooming, food, and other necessities. To paraphrase what CEO Ronald Coughlin remarked on May 24 on the company’s first-quarter earnings call: “if our Q1 results illustrate nothing else, they show our ability to execute and deliver without compromising progress against our long-term strategic road map.”
CFO Brian LaRose said that the company is “dedicated to sustaining our strategic investments to produce anticipated outcomes for the whole year and beyond” and that the management team is “confident in our forecast in the mid to long term.” Over the next year, the thirteen analysts polled by Koyfin expect WOOF shares to increase in value by an average of nearly 50%.
PetIQ (PETQ)
PetIQ has the lowest market valuation among the companies on our list, with only $519.2 million. PetIQ offers a wide variety of both prescription and over-the-counter pharmaceuticals for pets, including anything from topical ointments, chewable, and oral pills for behavior control to flea, tick, and other specialist meds. The CEO, Cord Christensen, acknowledged the company’s first-quarter results call on May 4: “PetIQ is well positioned to continue producing gains in our net sales and profitability, as well as create good cash flow.”
According to CFO Zvi Glasman, company officials are “pleased with our start of the year and remain enthusiastic about our future in 2022 and beyond.” Among the six experts polled by Koyfin, the average rating is “strong buy,” and they expect PETQ stock to increase in value by 76% within a year.
Zoetis Inc. (ticker: ZTS)
According to Wang, the trend of having animal health divisions buried inside more major human health divisions is quickly changing. In many ways, Zoetis is in the front of this shift. When it comes to animal health, Wang claims that “Zoetis is the indisputable leader in the worldwide sector.” It accounts for 11% of ProShares Pet Care ETF’s (PAWZ) total assets, making it the fund’s single biggest position.
Everything that happens in medicine “on the human side” also happens “on the pet side,” Hyman adds, noting that his business just purchased Basepaws, a startup that does DNA testing on cats. Wang argues that “Zoetis sports one of the largest moats in animal health” due to the company’s cost advantage and intangible assets, as well as the recent purchase.
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