What Happened?
Shares of pet food company Freshpet (NASDAQ: FRPT) fell 9.1% in the afternoon session after an analyst lowered the stock's price target amid concerns over increased competition from General Mills' entry into the fresh pet food market. TD Cowen reduced its price target on Freshpet to $63 from $72, while maintaining a Hold rating. The firm pointed to slowing growth and the significant threat of General Mills' planned national launch into the fresh dog food space with its Blue Buffalo brand in the fourth quarter. This new competition prompted the analyst to cut Freshpet's fourth-quarter sales growth estimate to 10%, below the consensus of 13%. This competitive pressure is particularly concerning given Freshpet's existing challenges, which include a modest revenue base, a history of burning through cash, and negative returns on capital that call into question the long-term viability of its business model.
The shares closed the day at $56.29, down 10.1% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Freshpet? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Freshpet’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock dropped 3% on the news that markets pulled back amid hotter-than-expected inflation data. The main concern for investors was the July Producer Price Index (PPI), a measure of wholesale inflation. The higher-than-expected reading suggests that companies could face squeezed profit margins due to rising costs. This also reduces the likelihood of the Federal Reserve cutting interest rates, which could further dampen economic activity. Compounding these inflation fears are multiple reports signaling a weakening consumer.
Freshpet is down 60.9% since the beginning of the year, and at $56.37 per share, it is trading 65.3% below its 52-week high of $162.59 from January 2025. Investors who bought $1,000 worth of Freshpet’s shares 5 years ago would now be looking at an investment worth $496.83.
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