RBC Capital Markets started off coverage on Petco Health and Wellness Company ( NASDAQ: WOOF ) with an Outperform rating on its view that earnings for the pet retailer will compound with top-line growth.
Analyst Steven Shemesh and team note that near-term noise amid a weakening consumer environment is inevitable, but believe much of that risk is baked in at the current share price levels.
"Longer term, we believe the company is well positioned to take share of the already fast-growing U.S. pet category given its revised company strategy, structurally advantaged real-estate portfolio, and vet expansion opportunity."
RBC's price target of $17 on WOOF is based on 18.5X the FY23 EPS estimate.
Shares of WOOF rallied 5.21% in early afternoon trading on Wednesday vs. the 52-week trading range of $12.88 to $26.21.
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Petco rallies after RBC Capital pitches bull case