Analysts recommend these pet stocks.
The global health crisis has changed American lives in countless ways. One way people are coping with stress and isolation is by adopting furry companions. There has been a boom in pet ownership in 2020. A Bank of America survey recently found 37% of Americans have adopted pets in the last six months alone. Analyst Elizabeth Suzuki says that surge in pet ownership will likely continue in coming quarters as more Americans move out of big cities to the suburbs. Here are seven stocks to buy to invest in the pet boom, according to Bank of America.
Tractor Supply Co. (ticker: TSCO)
Tractor Supply is a U.S. farm and ranch supplies retailer. Suzuki says nearly half of the company’s total revenue comes from the pet and animal categories. The company’s customer base is heavily skewed toward American homeowners living rural lifestyles, many of whom own both companion animals and larger animals. Suzuki says Tractor Supply will be the most direct hardline retail beneficiary from the 2020 pet boom. Bank of America has a “buy” rating and $171 price target for TSCO stock.
Chewy is a leading online retailer of pet food and supplies. Few companies have been able to compete with online retail juggernauts Amazon.com (AMZN) and Walmart (WMT), but analyst Nat Schindler says Chewy has differentiated its business by offering more than 1,600 pet specialist customer representatives who provide personalized service. Schindler says Chewy’s positioning in the niche online pet supplies market coupled with its focus on a subscription-based growth model has the stock poised to benefit from the pet boom. Bank of America has a “buy” rating and $72 price target for CHWY stock.
Church & Dwight Co. (CHD)
Church & Dwight produces household and personal care products and owns popular brands such as Arm & Hammer, OxiClean and Trojan. Analyst Olivia Tong estimates about 10% of Church & Dwight’s consumer sales comes from Arm & Hammer cat litter. The company even specifically mentioned cat litter demand on its recent earnings call. Tong says Church & Dwight has an attractive portfolio of defensive, value-oriented products that could see an uptick in demand from the pet boom. The stock is already up more than 30% in 2020, but Tong sees more upside ahead. Bank of America has a “buy” rating and $105 price target for CHD stock.
Colgate-Palmolive Co. (CL)
Colgate-Palmolive makes oral hygiene and other household products, including pet nutrition products. Its popular brands include Ajax, Speed Stick and Hill’s Pet Nutrition. Tong estimates Hill’s brand Science Diet, Prescription Diet and other pet food sales represent about 15% of Colgate-Palmolive’s total revenue. Those sales were up 16% in the first half of 2020, an extremely impressive growth rate for a consumer staples company. Tong says pet wellness and direct-to-consumer programs are major themes of the pet boom and provide tailwinds for Colgate-Palmolive’s pet business. Bank of America has a “buy” rating and $88 price target for CL stock.
Spectrum Brands Holdings (SPB)
Spectrum Brands produces a wide variety of household products and owns brands such as Kwikset, Baldwin and Pfister. Spectrum also makes pet supplies such as dog treats and grooming products. In the company’s fiscal third quarter, pet supplies accounted for 25% of the company’s total sales, and the segment generated 8.9% net sales growth year over year. Global pet earnings before interest, taxes, depreciation and amortization were up 29.7% from a year ago. Tong says she expects this strong performance to continue in coming quarters. Bank of America has a “buy” rating and $68 price target for SPB stock.
Elanco Animal Health (ELAN)
Elanco is one of the world’s largest producers of animal health medicines and vaccines. Elanco recently completed a $6.9 billion acquisition of the Bayer (BAYN) Animal Health business, a deal that analyst Michael Ryskin says is “transformative” for Elanco and significantly expands its presence in the companion animal health market. Bayer Animal Health reported 12% revenue growth in the first half of 2020. Ryskin says the deal will create plenty of synergy benefits for Elanco, and he is projecting double-digit earnings growth in coming years. Bank of America has a “buy” rating and $37 price target for ELAN stock.
Idexx Laboratories (IDXX)
Idexx Laboratories provides diagnostic and information technology products veterinarians use in monitoring and treating animals. Ryskin says Idexx is the market leader in both veterinary point-of-care instruments and lab services. He says the company has differentiated technology, a diversified product portfolio and a global sales team. In August, Idexx management reported U.S. clinical and wellness vet visits are trending well above pre-pandemic levels. Ryskin says Idexx is nearly a pure-play investment in companion animals and should be a big winner from the uptick in pet adoption. Bank of America has a “buy” rating and $440 price target for IDXX stock.
Pet stocks worth fetching:
— Tractor Supply Co. (TSCO)
— Chewy (CHWY)
— Church & Dwight Co. (CHD)
— Colgate-Palmolive Co. (CL)
— Spectrum Brands Holdings (SPB)
— Elanco Animal Health (ELAN)
— Idexx Laboratories (IDXX)
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