We came across a bullish thesis on Zoetis Inc. (ZTS) on Substack by Business Model Mastery. In this article, we will summarize the bulls’ thesis on ZTS. Zoetis Inc. (ZTS)’s share was trading at $170.42 as of Jan 28th. ZTS’s trailing and forward P/E were 32.03 and 29.41 respectively according to Yahoo Finance.
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Zoetis has emerged as a leader in the rapidly evolving animal health industry, benefiting from key trends like the humanization of pets, innovation in veterinary care, and a strong commitment to sustainability. As more pet owners view their animals as family members, the demand for advanced, human-grade veterinary care has skyrocketed, and Zoetis has capitalized on this shift. In its Companion Animal Segment, the company has seen remarkable growth, with a 15% operational increase in Q3 2024, driven by products like Librela and Solensia, which address osteoarthritis pain in aging pets. Solensia, in particular, achieved a 97% global revenue growth, highlighting the willingness of pet owners to invest in cutting-edge treatments for their animals.
The trend towards preventive and chronic care has also benefited Zoetis, as a significant portion of its revenues now comes from treatments addressing long-term conditions in pets. Its Dermatology Franchise, including products like Apoquel and Cytopoint, grew 16% operationally in Q3 2024, reflecting the rising demand for chronic condition management as pets age. These products cater to common dermatological issues, which are increasingly prevalent among older pets. This growing demand for chronic care solutions aligns with the broader industry trend, as the global market for chronic disease diagnostics and treatments is expected to expand at a 7%-8% CAGR, with Zoetis well-positioned to capture a significant share.
Diagnostics have become a cornerstone of Zoetis’ strategy, particularly in the realm of preventive care. Through its therapeutic offerings like Librela, Zoetis has brought treatment to 500,000 new osteoarthritis patients since its U.S. launch. The growing adoption of diagnostic tools in veterinary care is another opportunity for the company, as the global veterinary diagnostics market is projected to reach $8.9 billion by 2027. Zoetis is leveraging its expertise to help veterinarians detect and manage conditions like arthritis and cancer early, improving outcomes for pets and driving revenue growth for the company.
In addition to these therapeutic and diagnostic advancements, Zoetis has embraced retail distribution and e-commerce as key components of its strategy. The company has successfully driven 20% of Simparica Trio’s U.S. sales through retail channels, highlighting the shift towards more convenient distribution methods. E-commerce, particularly for preventive care products, is a rapidly growing market, with online sales expected to grow at a 9% CAGR through 2030. This growing retail and online presence has helped Zoetis reach more pet owners, further enhancing its market position.
Zoetis is also focusing on international growth, with its global revenues increasing by 13% operationally. The company has seen strong demand for both companion animal products and livestock vaccines in emerging markets, such as Brazil and Eastern Europe. By 2030, emerging markets are expected to account for 40% of global veterinary market growth, providing significant opportunities for Zoetis as it continues to expand its global footprint.
In the livestock segment, Zoetis is pivoting toward sustainable, high-growth areas like vaccines and genetics, as demonstrated by its recent sale of its medicated feed additive portfolio for $400 million. These innovations not only improve animal health but also align with more sustainable farming practices, which are becoming increasingly important in today’s climate-conscious world. With the livestock health market expected to grow at an 8.3% CAGR, Zoetis is well-positioned to remain a leader in both the companion animal and livestock health markets.
Overall, Zoetis’ focus on innovation, global expansion, and sustainability, combined with its leadership in therapeutic breakthroughs and diagnostics, ensures that the company is well-positioned to continue driving growth in the animal health industry. Whether addressing the needs of aging pets, tapping into emerging markets, or advancing sustainable solutions for livestock health, Zoetis is shaping the future of animal health and remains a top player in this dynamic and growing sector.
Zoetis Inc. (ZTS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held ZTS at the end of the third quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of ZTS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ZTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.