Citi has increased its price target for Freshpet (NASDAQ: NASDAQ:FRPT), from $127.00 to $144.00, while keeping a Neutral rating on the stock.
The adjustment comes ahead of the company's expected third-quarter earnings report in the week of November 4, 2024.
Citi's analysis suggests that for the third quarter of 2024, Freshpet is likely to post sales and EBITDA that surpass the consensus estimates compiled by Visible Alpha.
This anticipated performance could lead to an upward revision of the company's financial guidance, particularly regarding EBITDA.
The outlook for Freshpet ahead of its earnings report appears positive, according to the firm's projections. However, the analyst highlighted some concerns that temper expectations for significant stock price appreciation.
These include Freshpet's current valuation, which is nearly 6 times its sales, and the already optimistic market positioning.
In other recent news, Freshpet reported a 28% increase in second-quarter sales, prompting the company to raise its sales guidance to a 26% increase or more. The pet food manufacturer has also introduced a new executive severance plan aimed at standardizing arrangements and protecting intellectual property. As part of recent changes, Freshpet appointed Nicki Baty as its new Chief Operating Officer, a strategic move expected to support the company's expansion goals.
Analysts have responded positively to these developments. TD Cowen maintains a Buy rating on Freshpet shares, predicting the company will achieve a 19% EBITDA margin by 2027. DA Davidson has increased Freshpet's price target from $157.00 to $175.00, while Baird raised its target to $140.
In addition to these developments, Freshpet has announced the approval of a new equity incentive plan, replacing the previous plan. The 2024 Equity Plan authorizes the issuance of up to 1,450,000 shares of common stock for various stock-based awards to eligible employees, directors, and consultants. The details of future awards under this new plan are currently indeterminable.
InvestingPro Insights
Freshpet's financial metrics and market performance align with Citi's optimistic outlook. According to InvestingPro data, the company's revenue growth remains strong, with a 31.01% increase in the last twelve months as of Q2 2024. This robust growth supports Citi's expectation of sales surpassing consensus estimates.
The company's valuation metrics, however, underscore Citi's caution. Freshpet's P/E ratio stands at a lofty 264.67, with an adjusted P/E of 345.09 for the last twelve months as of Q2 2024. This high valuation multiple aligns with Citi's concern about the stock's current pricing.
InvestingPro Tips highlight that Freshpet is trading at high earnings, EBIT, EBITDA, and revenue valuation multiples, which corroborates Citi's valuation concerns. However, these tips also indicate that net income and sales are expected to grow this year, potentially supporting the positive outlook on the company's financial performance.
Investors should note that Freshpet has shown a remarkable 133.94% price total return over the past year, suggesting strong market confidence. This performance, coupled with the expectation of profitability this year, may justify the premium valuation to some extent.
For a more comprehensive analysis, InvestingPro offers 10 additional tips for Freshpet, providing deeper insights into the company's financial health and market position.
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