Shares of PetMed Express (PETS -3.87%) were sinking 22.8% as of 10:54 a.m. EDT on Thursday. The decline came after Sidoti analyst Anthony Lebiedzinski downgraded the stock to a neutral rating from his previous buy rating.
Lebiedzinksi's downgrade of PetMed came following a big spike for the online pet pharmacy stock on Wednesday. Shares jumped more than 58%. This sizzling gain appeared to be related to traders in some online communities viewing PetMed Express as a good short squeeze candidate.
The best thing for long-term investors to do with all this volatility is focus on PetMed's business prospects more than the stock's fluctuations. However, after a boost from the COVID-19 pandemic, the company's growth prospects appear to be tapering off.
PetMed reported that net sales in its fiscal 2021 fourth quarter, which ended on March 31, 2021, slipped 3.5% year over year. The problem was that online pharmacy business declined as veterinarian clinics and retail stores reopened for business.
It's possible that a short-squeeze scenario could spark a dramatic rebound for PetMed shares. Even if that happens, though, it will only be temporary. The more important thing to watch is the company's efforts to build its customer base and add new services. PetMed Express CEO Menderes Akdag stated in the company's Q1 update that these initiatives will be top priorities in fiscal 2022.