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Why Freshpet Gained 11% in September

By Jeremy Bowman – Oct 5, 2021 at 8:34AM

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The fresh pet food maker won over Wall Street last month.

What happened

Shares of Freshpet (FRPT -4.89%) were moving higher last month, bucking the broader pullback in the market. It was a relatively quiet month for the fresh pet food maker, but an analyst upgrade and a bullish response to a presentation at a Jefferies conference were enough to lift the stock 11% according to data provided by S&P Global Market Intelligence.

So what

It was a rough month for growth stocks generally with the S&P 500 and Nasdaq Composite falling 5% on concerns about rising interest rates and inflation, but Freshpet managed to gain as the company has qualities as a recession-proof pet stock that most growth stocks don't.

An English beagle looking up.

Image source: Getty Images.

On Sept. 10, the stock ticked up 2% after Cowen initiated the stock at outperform with a price target of $229. Analyst Brian Holland said the company is in "the early innings of [market] share incursion" from traditional pet food and said the company had a "formidable competitive advantage" thanks to a differentiated offering and a unique supply chain.

Freshpet distinguishes itself from most pet food companies by selling fresh, refrigerated pet food in Freshpet Fridges that are in thousands of supermarkets and pet stores.

On Sept. 16, the stock kicked off a two-day rally, rising 8% after it presented at a Jefferies pet conference. CEO Billy Cyr didn't reveal any news, but assuaged investor concerns about supply chain challenges, and also pointed to a promising fourth quarter as the company will lap a number of disruptions last December, including a spike in COVID-19 cases and bad weather that impacted shipping.

Following those gains, the stock pulled back in the last week of the month alongside the broad market.

Now what

In its most recent earnings report the company raised its full-year revenue guidance to at least $445 million, compared to prior guidance of $430 million. The company has also upped its long-term guidance, and expected to grow its customer base from 4 million households in North America to 11 million in 2025, nearly tripling its business. Cyr also noted at the Jefferies conference that the entry of Gen Z into the pet food market has expanded the market and demand for fresh pet food, which should continue to provide a tailwind for the company.

The stock is up more than 600% since its 2014 initial public offering, and with its first-mover advantage in fresh pet food and broader tailwinds in the market, the company looks primed to keep outperforming.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Freshpet and Jefferies Financial Group Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Freshpet Stock Quote
$60.82 (-4.89%) $-3.13
Jefferies Financial Group Stock Quote
Jefferies Financial Group
$36.09 (-4.35%) $-1.64
Cowen Group Stock Quote
Cowen Group
$38.67 (0.18%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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