This year, we are witnessing sweeping changes that are driving growth across multiple industries thanks to the global pandemic. This has presented some truly unique investing opportunities as certain companies capitalize on the latest market trends. That includes the pet industry, which is benefitting from increasing pet ownership as people cope with the stress and seclusion that has impacted many throughout the pandemic.
The truth is that the pet industry was strong even before the health crisis, as Americans spent over $95.7 billion on their pets in 2019. That number should increase substantially this year and pandemic has helped to improve the sales of companies offering pet products and services. When you look at the big picture, it’s easy to see why pet stocks could turn out to be big winners over the next decade. Pet ownership is increasing faster than ever, pet spending is skyrocketing, and trends like e-commerce are driving market growth and innovation for companies in the industry. That’s why it might be a good idea to familiarize yourself with some of the best pet stocks.
Here are the top 3 pet stocks to consider buying now:
One of the interesting things about pet owners these days is that more and more of them are going the extra mile to treat their furry friends as a member of the family. That includes buying top-quality pet foods for their animals, even if it means spending a little extra. That’s why Freshpet (NASDAQ:FRPT) is a great option for investors to consider. It’s a company that manufactures and markets natural fresh products, refrigerated meals, and treats for dogs and cats. When pet owners are looking to feed their loyal companions food that doesn’t include preservatives, additives, or artificial ingredients, Freshpet is one of the best options.
There’s a lot to like about this company, as it has developed a wide economic moat thanks to its proprietary manufacturing processes and formulas. Freshpet has also formed several strategic retail partnerships with major companies like Kroger (NYSE:KR), Walmart (NYSE:WMT), Wholefoods, and Petco. The company is on the right track, as it reported a year-over-year Net Sales increase of 29% in Q3 along with an Adjusted EBITDA increase of 42.2% year-over-year to $17 million. This is a nice option if you are interested in a company targeting a niche market and creating loyal customers. 83% of dog owners reported seeing a visible difference in their pet after feeding them Freshpet food, which is just the type of statistic that pet lovers will be attracted to.
This pet stock is a member of the S&P 500 that has quietly rallied up 73% year-to-date. IDEXX Laboratories (NASDAQ:IDXX) is the global leader in pet diagnostics and veterinary practice software. One of the big pluses with pet health products and services is that pet owners normally pay cash for them, meaning that issues like waiting on reimbursements are not a problem for this company. It’s a business that has created a strong competitive advantage by offering a range of companion animal diagnostic tests that deliver results conveniently and quickly. Idexx Laboratories is constantly innovating and improving its tests and also benefits from its large national lab network and high switching costs across many of its products.
It’s a company that is having a strong 2020, and in Q3 Idexx reported year-over-year EPS growth of 36% along with revenue growth of 19% to $722 million. US Veterinary practices are already experiencing a strong rebound in clinical visits, and that trend should only continue in 2021 as the pandemic begins to subside. Investors that are interested in owning one of the premier pet stocks should look to add shares on significant pullbacks.
If you are looking for best-in-breed when it comes to pet stocks, look no further than Chewy (NYSE:CHWY). It’s a pure-play e-commerce stock that has been on fire this year and is up over 150% year-to-date. There are several reasons to consider adding shares of the leading online retailer of pet food even after such a strong rally. First, the company has been reporting strong top-line growth throughout the year. In Q2, net sales for the company grew by 47% year-over-year to reach $1.7 billion. Q2 Adjusted EBITDA for the company increased by 153% year-over-year as well, however, the company did report a net loss. It will be interesting to see if Chewy can keep up its torrid sales growth when it reports Q3 earnings this week. You might be thinking that Chewy is benefitting from short-term tailwinds, but keep in mind that pet ownership is a long-term commitment.
Investors should also consider the recent announcement that Chewy is launching telehealth services for pets. This service allows pet owners to connect with veterinarians virtually for consultations and could be a move that helps to grow the company’s brand. There’s also a lot to like about how Chewy keeps customers coming back, such as its autoship feature which offers discounts for repeat buyers. Finally, the fact that Chewy is a consumer goods company means that its sales should hold up well in any economy, which is nice to know considering the potential for a prolonged recession.Leave a comment