6 pet stocks to buy amid the boom in ownership
March 29, 2021 (Investorideas.com Newswire) Would you believe that ever since COVID-19 became the song on everybody's lips, at least 3 out of every 10 Americans have become pet owners? This toy Goldendoodle is, in fact, one of their favorites!
This is according to a survey conducted by the Bank of America.
With isolation and quarantine measures becoming prevalent in every part of the world, people started looking for ways to make their home more fun, and many sought to find companionship amongst furry creatures.
As a result of this, lots of pet brands enjoyed an increase in consumer demands. This surge in demand then gave rise to an increase in the value of pet stocks.
If you're a pet lover and have a knack for stock investment, now may be the time to take advantage of this boom.
According to the experts at the Bank of America, here are six pet stocks investors should consider buying to benefit from the COVID-19 pet boom.
- Tractor Supply Co. (TSCO)
- Chewy (CHWY)
- Church & Dwight Co. (CHD)
- Colgate-Palmolive Co. (CL)
- Spectrum Brands Holdings (SPB)
- Elanco Animal Health (ELAN)
Note: You can click the links above to find out the current price of each stock.
1. Tractor Supply Co.
Although Tractor Supply Co. is widely known to be a company that deals in the provision of farm and ranch supplies, lawn and garden, clothing materials, and animal feeds, the company actually generates more than half its total revenue from the pet and animal categories.
"Almost half of TSCO's annual sales are in pet & animal categories, and Tractor Supply serves rural lifestyle customers who are generally homeowners/property owners and often have a large animal in addition to companion animals," BofA said.
According to BofA, Tractor Supply Co. has a "buy" rating and a $171 price target. According to the experts at Business Insider, Tractor Supply Co. stocks have a 22% Upside Potential.
Even before the COVID-19-inspired rise in demand for all things pet-related, Chewy has been amongst the best-performing pet brands around.
The pet food and supplies retailer has managed to keep a thriving battle with Amazon and Walmart going. It's been the go-to pet store for almost all dog and cat supplies. Talk about Goldendoodle toys, kitties' foods, etc.
"Chewy has been able to achieve scale despite going toe-to-toe with behemoth Amazon by differentiating itself with 1600+ pet specialist customer reps," BofA said.
Thanks to the unique pet services of Chewy, BofA rated it with a "buy" rating and a $72 price target.
The Business Insider, on the other hand, rated the company's stock at 31% Upside Potential.
3. Church & Dwight Co. (CHD)
Church & Dwight Co. is a producer of popular household and personal care products. But in addition to that, the company also owns popular brands like Arm & Hammer, OxiClean, and Trojan.
An excerpt from BofA's survey detailed that the cat litter category of the CHD accounts for roughly 19% of the company's sales.
"CHD is a global household products and personal care company with well-known brands like Arm & Hammer, which manufactures a wide range of products under the brand, including cat litter, which we estimate accounts for roughly 10% of the company's consumer sales," BofA said.
BofA added that CHD has an attractive portfolio of value-oriented products that could see an uptick in demand from the pet boom.
By the end of 2020 alone, CHD's stock had already enjoyed a 30% surge. With Business Insider's 15% Upside Potential and BofA's $105 Price Target, one can only expect to see more upside ahead.
4. Colgate-Palmolive Co. (CL)
Colgate makes oral household products. But, in addition, the company also has its hands in pet nutrition products - a category which the BofA claims is responsible for 15% of the company's overall revenue.
And quite rightly so.
Since the American Kennel Club recently confirmed that most people prefer small dog breeds to big ones, one can understand the reason why companies like Colgate-Palmolive are benefiting greatly from the pet nutrition industry.
With smaller dog breeds comes the need for regular grooming exercises like tooth brushing, and that's something brands like Colgate lives on.
BofA then added that "Increasing pet ownership and innovation and improved digital capabilities and subscription/DTC (direct-to-consumer) programs are helping provide solutions to supplement in-person vet visits ... We expect this engine of growth to continue,"
Per the BofA's estimate, Colgate is expected to reach a price target of $85, with a "buy" rating hanging across its neck. Business Insider anticipates a 13% upside potential with this stock.
5. Spectrum Brands Holdings (SPB)
For quite some time, SPB has been doing quite well. And that's thanks in no small part to the performance of its pet supplies line.
Although SPB specializes in the manufacture of a wide variety of household products and owns brands such as Kwikset, Baldwin, and Pfister, it is its dog treats and grooming products line that has returned the best results year after year.
With lots of pet owners relying on treats and toys to train pets like Goldendoodle dogs, you can understand the reason behind the surge in the brand's pet supplies line.
According to the company's fiscal third-quarter sales review, pet supplies sales accounted for 25% of the company's total sales. And after that, the category kept on generating 8.9% net sales growth year over year.
The BofA expects this bullish run to continue as the pet industry continues to enjoy its boom. As it is, SPB stock has a "buy" rating and a $68 price target for SPB stock, along with a 14% upside potential.
6. Elanco Animal Health (ELAN)
Elanco is one of the biggest names in the pet vaccine industry. The company specializes in the production of pet medicines and vaccines. They are aimed at helping livestock and pet owners keep their animals safe and free of health issues.
With more and more pet lovers now opting to buy adult dogs and puppy dogs, you can expect the value of Elanco's stock to keep on rising because there will be lots of pets in need of vaccination and medical treatments.
Additionally, Elanco's stock has been raised by the recent acquisition of Bayer Animal Health business for $6.9 billion.
According to the BofA, that move is "transformative", and bound to significantly expands Elanco' presence in the companion animal health market because "Bayer Animal Health reported a strong start to 2020, with ~12% sales growth in 1H20, driven by a high exposure to companion animal products, particularly those sold through alternative channel (i.e., online, retail markets)."
With the synergy created between the two lines, BofA expects Elanco's stock to reach a price target of $37. Along with this, a 6% upside potential is also expected, too.
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