We recently published a list of 10 Best Nasdaq Stocks Under $5 to Buy. In this article, we are going to take a look at where Petco Health and Wellness Company Inc. (NASDAQ:WOOF) stands against other best Nasdaq stocks under $5 to buy.
The Nasdaq is one of the top three most-followed stock market indices in the United States, comprising over 2,500 stocks. Its composition is heavily skewed towards the Technology sector, and as of February 10, 2025, the technology sector constituted around 60% of the index’s weight. Consumer Discretionary follows as the second-largest sector, accounting for approximately 20% of the weight. Given this substantial weighting, the Nasdaq is commonly regarded as a leading indicator of the performance of the IT industry.
While the Nasdaq includes tech giants with the largest market capitalizations, it also presents opportunities to invest in stocks often referred to as “penny stocks.” These stocks, priced under $5, offer significant growth potential for investors seeking high returns at a relatively low capital outlay. Although these stocks come with high return and diversification opportunities, they also carry higher risks due to their smaller market capitalization, relatively higher debt, and greater volatility in share prices.
To provide a perspective on the small-cap investing landscape, we refer to recent insights from Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners. In November 2024, during an interview with Yahoo Finance, Gannon discussed his thesis on small-caps. He noted that small-caps had been out of favour for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost small-cap companies, describing this shift as nothing short of a “revolution.”
As a result, exciting return opportunities are anticipated in the small-cap space in the coming years. When reviewing stocks priced under $5, investors should carefully select emerging companies with innovative business models or disruptive technologies, and those that have the potential to deliver exponential growth as they capture market share, develop new products, or enter new markets.
Our Methodology
To identify the 10 best Nasdaq stocks under $5 to buy, we screened Nasdaq-listed companies with a market price below $5. We selected the 10 companies that were the most widely held by hedge funds and ranked them in ascending order of hedge fund holders, as of Q3 2024.
Note: All pricing data is as of market close on February 10.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A groomer devotedly brushing a fluffy white dog.
Petco Health and Wellness Company Inc. (NASDAQ:WOOF)
Current Market Price: $3.02
Number of hedge funds: 22
Petco Health and Wellness Company Inc. (NASDAQ:WOOF) is a leading pet health and wellness retailer offering a wide range of products and services for pets, including food, supplies, grooming, and veterinary care. The company operates a network of retail locations and provides an integrated approach to pet care, focusing on the health and well-being of pets and their owners.
Petco Health and Wellness Company Inc. (NASDAQ:WOOF) is well-positioned to take advantage of the growing pet care market, driven by increasing pet ownership and consumer spending on pet health and wellness. For Q3 2024, the company reported steady earnings results, with net revenue rising modestly to $1.51 billion (+1.2%). While growth was driven by the Consumables segment and Services & other businesses, a decline in the Supplies and Companion Animal segment partially offset that growth. Nevertheless, the company managed to reduce its net loss for the quarter to $6.5 million from a loss of $14.5 million in the previous year quarter. For Q4 2024, Petco Health and Wellness Company Inc. (NASDAQ:WOOF) anticipates net revenue of approximately $1.55 billion and an adjusted EPS ranging from $0.0 to $0.02. Overall, management is optimistic about the structural improvements made in the first nine months of the year, positioning them for a strong finish to 2024, and expects the momentum to continue into 2025.
Overall, WOOF ranks 4th on our list of best Nasdaq stocks under $5 to buy. While we acknowledge the potential of WOOF to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WOOF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
