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Petco’s Quarterly Results Outperform As Digital Sales Boom; Street Sees Over 31% Upside

Petco Health and Wellness Company posted better-than-expected results for the fiscal fourth quarter (ended Jan. 30), driven by digital sales growth of 90%. Shares of the pet health and wellness business operator rose 1.4% in Thursday’s extended trading session after closing 3.8% lower on the day.

Petco’s (WOOF) 4Q adjusted earnings increased 88.9% to $0.17 per share on a year-over-year basis and beat Street estimates of $0.11 per share. Net sales jumped 16% to $1.34 billion and surpassed analysts’ expectations of $1.31 billion.

The company’s comparable sales growth was 17% during the quarter. Additionally, adjusted EBITDA expanded 13% to $148.6 million. (See Petco stock analysis on TipRanks)

Petco CEO Ron Coughlin commented, “On the heels of a successful IPO in January, we closed the year with a strong fourth quarter, and that momentum has carried into 2021.”

For fiscal 2021, the company projects revenues and adjusted earnings to be in the range of $5.25-$5.35 billion and $0.63-$0.66 per share, respectively. Consensus estimates for revenues and earnings are pegged at $5.24 billion and $0.60 per share, respectively.

Following the 4Q results, Wells Fargo analyst Zachary Fadem maintained a Buy rating and a price target of $30 (33.2% upside potential) on the stock.

Fadem believes “today’s print should solidify investor confidence that the Petco growth story remains early days, upside levers are plentiful and ongoing tailwinds (via stimulus, a strong consumer, category growth) remain robust.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 analysts suggesting a Buy and 4 analysts recommending a Hold. The average analyst price target of $29.63 implies a 31.5% upside potential to current levels.

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