11 Best Pet Stocks To Buy Now

Published on December 7, 2022 at 11:41 am by Hamna Asim in Hedge Funds, News

In this article, we discuss 11 best pet stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Pet Stocks To Buy Now.

Morgan Stanley expects annual growth of 8% in the pet industry by 2030, noting that there has been an addition of nearly 5 million pets in the United States as compared to 2019, mainly due to the COVID-driven lockdowns. AlphaWise, the proprietary survey and data arm of Morgan Stanley Research, carried out a survey of about 2500 pet owners in June. The survey shows that “fur babies” have made a permanent place in the hearts and households of their owners, significantly affecting spending patterns of pet parents across the US and worldwide.

On the household level, Morgan Stanley forecasts spending to rise to $1,320 per pet by 2025, and this figure will reach $1,897 by 2030. Comparatively, the prior outlook for spending per pet was $1,292 by 2025 and $1,909 by 2030.

Simeon Gutman, an equity analyst covering hardline, broadline and food retail at Morgan Stanley, wrote in a report dated November 2:

“An outcome in line with this expectation would increase total spending in the industry by 134% over the next decade, from $118 billion in 2019 to $277 billion by 2030.”

Gutman added further:

“As Millennials become homeowners, delay having children and increasingly have smaller families, they tend to spend more on their pets than older pet owners do, especially on premium food and services. The increase in ownership during the pandemic was driven primarily by this cohort, and they are likely to accelerate the trends toward treating pets like humans and providing premium care. As a result, the COVID benefit to the pet industry likely has a long tail.”

Some of the best pet stocks to consider for exposure to one of the quickest growing industries include Chewy, Inc. (NYSE:CHWY), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Zoetis Inc. (NYSE:ZTS).

Our Methodology

We selected the following pet stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.

Photo by James Lacy on Unsplash

Best Pet Stocks To Buy Now

11. Wag! Group Co. (NASDAQ:PET)

Number of Hedge Fund Holders: 2

Wag! Group Co. (NASDAQ:PET) is a New York-based company that develops and operates a proprietary marketplace technology platform, enabling independent pet caregivers to connect with pet owners. On November 10, Wag! Group Co. (NASDAQ:PET) posted a Q3 revenue of $15.4 million, up 161.0% on a year-over-year basis. Gross bookings increased 85% to $25.3 million, compared to $13.7 million in the third quarter of 2021. For full-year 2022, Wag! Group Co. (NASDAQ:PET) expects revenue to be in the range of $51 million to $52 million, a 7% increase versus the earlier forecast at the midpoint of the range.

On November 21, Oppenheimer analyst Jason Helfstein initiated coverage of Wag! Group Co. (NASDAQ:PET) with an Outperform rating and a $5 price target. The analyst believes the company is well positioned to grow as pet services shift online. He added that the stock is depressed on lower investor appetite for small-cap companies which are not yet cash flow positive.

According to Insider Monkey’s third quarter database, 2 hedge funds were bullish on Wag! Group Co. (NASDAQ:PET), with combined stakes worth $1.10 million.

In addition to Chewy, Inc. (NYSE:CHWY), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Zoetis Inc. (NYSE:ZTS), Wag! Group Co. (NASDAQ:PET) is one of the best pet stocks to monitor.

10. Trupanion, Inc. (NASDAQ:TRUP)

Number of Hedge Fund Holders: 11

Trupanion, Inc. (NASDAQ:TRUP) is a Washington-based provider of medical insurance for cats and dogs on a monthly subscription basis in the United States, Canada, Puerto Rico, and Australia. The company serves pet owners and veterinarians. Trupanion, Inc. (NASDAQ:TRUP) is one of the best pet stocks to monitor. The Q3 2022 revenue of $233.76 million increased 28.7% year-over-year and beat market estimates by $3.65 million. Subscription enrolled pets were 808,077 on September 30, 2022, an increase of 19% over the third quarter of 2021.

On November 4, Lake Street analyst Mark Argento maintained a Buy rating on Trupanion, Inc. (NASDAQ:TRUP) but lowered the price target on the shares to $67 from $112. While noting that Trupanion, Inc. (NASDAQ:TRUP) “posted another quarter of strong revenue growth,” the analyst thinks it may take “a few quarters” for margins to normalize. He would use weakness as a buying opportunity, citing Trupanion, Inc. (NASDAQ:TRUP)’s “defensible, market-leading, and mass-market inflecting model”.

According to Insider Monkey’s data, 11 hedge funds were bullish on Trupanion, Inc. (NASDAQ:TRUP) at the end of September 2022, compared to 14 in the prior quarter. Nine Ten Partners is the biggest position holder in the company, with 3.6 million shares worth $216.2 million.

Here is what Saga Partners has to say about Trupanion, Inc.(NYSE:TRUP) in its Q2 2022 investor letter:

“The Portfolio first bought Trupanion during Q3’18. Trupanion provides pet insurance to help owners budget for vet expenses if their pet needs care. While pet insurance has historically been a bad product with confusing, if not misleading, coverage that left pet owners and veterinarians distrustful of pet insurance, Trupanion simplified the product by providing comprehensive coverage and increased transparency to help customers and vets understand the value proposition.

Trupanion’s competitive advantage primarily comes from being a low-cost provider. It integrates all the parts of the value chain that matter which creates efficiencies and a better customer experience. Unlike most competitors, Trupanion underwrites its own policies and doesn’t reinsure their policies. They have their own call centers, a national sales force of Territory Partners, and process their own claims. The combination of these efforts reduces operating costs by ~20% relative to peers. These savings are used to offer customers higher payout ratios (~70% of premiums earned are paid out in vet claims) compared to an average of 50% for peers. This naturally attracts more customers over time which helps Trupanion scale operating costs further, which can further be share with customers. Other factors like the relationships that Territory Partners have with vets and hospitals, which typically take 2-3 years to build through repeated visits and its integrated automated claims software called Trupanion Express all feed into building its durable competitive advantage…” (Click here to see the full text)

9. BARK, Inc. (NYSE:BARK)

Number of Hedge Fund Holders: 13

BARK, Inc. (NYSE:BARK) is a New York-based dog-centric company, providing products, services, and content for dogs. It operates through two segments – Direct to Consumer and Commerce. The company serves dogs through monthly subscription services. BARK, Inc. (NYSE:BARK) is one of the best pet stocks to buy now. The Q3 2022 revenue of $143.8 million climbed 19.6% year-over-year and outperformed Wall Street estimates by $8.7 million. The average order value rose by $2.45 to $32.18, up 8% compared to the same period last year.

On November 10, Canaccord analyst Maria Ripps reiterated a Buy recommendation on BARK, Inc. (NYSE:BARK) but trimmed the price target on the shares to $5 from $8. The analyst said she is encouraged by evidence of progress across multiple growth vectors and sees the early part of calendar 2023 as a core period of validation towards BARK becoming a profitable, multi-product company that should attract a larger investor audience.

According to Insider Monkey’s data, 13 hedge funds were bullish on BARK, Inc. (NYSE:BARK) at the end of Q3 2022, compared to 17 funds in the last quarter. Jim Simons’ Renaissance Technologies is the biggest position holder in the company, with 2 million shares worth $3.6 million.

8. Heska Corporation (NASDAQ:HSKA)

Number of Hedge Fund Holders: 14

Heska Corporation (NASDAQ:HSKA) is a Colorado-based company that offers veterinary and animal health diagnostic and specialty products for canine and feline healthcare markets in the United States, Canada, Mexico, Australia, France, Germany, Italy, Malaysia, Spain, and Switzerland. On September 12, Heska Corporation (NASDAQ:HSKA) said that it will acquire 100% of the share capital of LightDeck Diagnostics, an innovative planar waveguide fluorescence immunoassay diagnostics with robust manufacturing and specialized production capabilities for a purchase price of $38.7 million. The transaction is expected to conclude in H1 2023.

On November 14, Piper Sandler analyst David Westenberg reiterated an Overweight rating on Heska Corporation (NASDAQ:HSKA) but trimmed the price target on the shares to $165 from $170. The analyst updated his model to reflect the Q3 earnings report.

Among the hedge funds tracked by Insider Monkey, Heska Corporation (NASDAQ:HSKA) was part of 14 public stock portfolios at the end of Q3 2022, compared to 17 in the earlier quarter. Brian Bares’ Bares Capital Management is a notable stakeholder of the company, with 110,500 shares worth $8 million.

Alger Capital made the following comment about Heska Corporation (NASDAQ:HSKA) in its Q3 2022 investor letter:

“Heska Corporation (NASDAQ:HSKA) sells diagnostic tools and specialty products to the animal health market. Specifically, Heska sells blood testing and supplies, digital imaging products, software and single-use products primarily for cats and dogs. The company also offers private-label vaccines and pharmaceutical production primarily for cattle and other small mammals.

Shares of Heska underperformed this quarter largely due to an industry-wide slowdown in the animal health market. The company reported lower than expected earnings results due to the recent weakness in vet visitation trends. Consequently, management lowered forward guidance given the difficult macroeconomic outlook. While near-term weakness is expected at this time, we believe the company remains well positioned to benefit from new product launches going into next year.”

7. PetMed Express, Inc. (NASDAQ:PETS)

Number of Hedge Fund Holders: 15

PetMed Express, Inc. (NASDAQ:PETS) is a Florida-based company that operates as a pet pharmacy in the United States. The company markets prescription and non-prescription pet medications, health products, and other supplies for dogs, cats, and horses. PetMed Express, Inc. (NASDAQ:PETS) paid a per share quarterly dividend of $0.30 on November 30. The dividend yield on December 7 came in at 6.26%.

On September 21, Jefferies analyst Corey Grady assumed coverage of PetMed Express, Inc. (NASDAQ:PETS) and maintained a Hold rating on the shares with an unchanged price target of $20. The analyst expects partnership & M&A announcements over the coming quarter, but said the key to stock performance will be a sustained recovery in new customer growth, which could take time given PetMed Express, Inc. (NASDAQ:PETS)’s “challenged competitive position.”

According to Insider Monkey’s data, 15 hedge funds were long PetMed Express, Inc. (NASDAQ:PETS) at the end of September 2022, compared to 11 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 233,095 shares worth $4.55 million.

Here is what Silver Ring Value Partners has to say about PetMed Express, Inc. (NASDAQ:PETS) in its Q4 2021 investor letter:

“PETS was one of the original online sellers of pet medication directly to consumers. Once upon a time this was a growing business, given that they offered much lower prices than those which could be obtained at the vet’s office. However, with Chewy’s entry into the pet pharmacy business and Covetrus’s online offering that allows vets to sell drugs online at only a small premium to PETS’s prices, the value of PETS’s customer proposition has greatly diminished.

The company has been squeezed out of obtaining new customers through paid search by Chewy’s massive ad blitz. This is a situation that is likely long-term in nature. As a result, PETS’s business has entered into a decline in terms of both existing and new customers. This is a trend that I view as likely to continue over the long-term. Essentially, there is no longer a strong reason for PETS to exist as a business – it is neither the lowest priced nor the most differentiated, and is facing bigger competitors that are muscling it out of the business.

As a result of these structural changes, I believe the business is going to continue to decline for a long time, resulting in a far smaller business value than the recent price. I purchased a small put option position during the quarter. My plan is to stick to a total budget of no more than 2% cumulatively over the life of the investment. I will be monitoring new information, and if my thesis appears to be validated by the facts, I will likely continue with the position up until the 2% threshold.”

6. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF)

Number of Hedge Fund Holders: 16

Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) is a California-based health and wellness company focused on improving the lives of pets, pet parents, and its Petco partners. The company provides veterinary care, grooming, training, tele-health, and pet health insurance services. Petco Health and Wellness Company, Inc. (NASDAQ:WOOF)’s Q3 revenue of $1.5 billion jumped 4.2% year-over-year, beating market estimates by $10 million. The company also reaffirmed the full-year 2022 guidance for net revenue of $5.975 billion to $6.05 billion, versus a consensus of $6.01 billion.

On December 1, RBC Capital analyst Steven Shemesh reaffirmed an Outperform rating on Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) but lowered the price target on the shares to $16 from $17. The company reported a “solid” comp growth and its in-line margins led to a “better than feared” quarter, though its exposure to variable rate debt and uncertainty around sponsor ownership weigh on the stock, the analyst told investors.

According to Insider Monkey’s Q3 data, 16 hedge funds were bullish on Petco Health and Wellness Company, Inc. (NASDAQ:WOOF), compared to 21 funds in the prior quarter.

Like Chewy, Inc. (NYSE:CHWY), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Zoetis Inc. (NYSE:ZTS), Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) is one of the best pet stocks to invest in.

Baron Funds made the following comment about Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) in its Q3 2022 investor letter:

“Petco Health and Wellness Company, Inc. (NASDAQ:WOOF) is a pet supply retail chain. Shares were down during the quarter as the company reported earnings that missed analyst expectations. Strong sales in pet food and pet services (two categories that tend to be less discretionary) were more than offset by softer-than-expected sales in non-essential supplies and companion animals (both of which tend to be more discretionary). Given management’s expectation for continued consumer spending softness, the company lowered profit guidance for the remainder of the year. While pet food and pet services carry a higher lifetime value for Petco, these categories are also lower margin and so the mix shift towards these categories will be a short-term drag on profitability. Despite these short-term challenges, we remain positive on Petco’s long-term growth prospects. Weakness in supplies and companion animals has been temporary in prior economic slowdowns and, as a result, should rebound over the coming quarters. At the same time, services continue to expand nicely as the company grows its veterinary practices. Lastly, Petco’s new store concept targeting rural communities is off to a strong start, setting the stage for a second growth concept going forward.”

Click to continue reading and see 5 Best Pet Stocks To Buy Now.

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