PetMed Express (NASDAQ:PETS), one of the largest online pet pharmacies around, surged 58.4% in trading yesterday on trading volume that was over 11 times the level normally seen. The stock did slide back somewhat, losing about 3.06% in premarket trading, and sliding further after the market opened. A massive surge in put options was also seen, similar to trading that was seen the Friday before the Memorial Day weekend hit. Financial analysts, meanwhile, have little to say about PetMed Express, though some are already filing this one under the status of “meme stock”, alongside the likes of GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC).
PetMed Express a New Short Squeeze Target?
The latest numbers emerging around PetMed Express are staggering in their way. Not only was trading volume 11 times normal levels, so too was the volume of put options placed on the company. Normally, the company sees 455 put options on the stock, but yesterday, 5,541 options were purchased instead. Reports suggest that the company's short volume ratio is right around 27%, which is sufficient to draw short squeezers out in substantial numbers. That in turn suggests why PetMed Express' share price went up at the same time investors purchased huge volumes of what amount to bets against the company.
PetMed Express has seen consistent profitability over the last few quarters, reports note. Most compare it to Chewy (NYSE:CHWY), which has been pursuing technologically-adept pet owners for quite some time. In fact, some regard PetMed Express as a value alternative; PetMed Express shares trade at $36.61 as of this writing while Chewy's shares better than double that at $74.69 as of this writing.
While some believe a short squeeze is in progress, one of the primary instigators of short squeezes of late—the Reddit group r/wallstreetbets—doesn't seem to have much connection to PetMed Express at all. However, it's worth noting that PetMed Express saw a surge back in late January, back around the same time that GameStop and AMC first saw surges of their own. During that spike, PetMed Express saw its share price push $57 per share, the company's 52-week high.
There are signs that the pet care market, in general, is on the rise; a new report from Market Research Engine details a compound annual growth rate of 6.04% through 2027 in the pet grooming products market alone. Additionally, a new competitor, Barkbox is gaining ground in the market, thanks in large part to its recent acquisition by Northern Star Acquisition that saw the company renamed The Original BARK Company. Pet supplies, in general, saw an uptick during the pandemic as people looked for more to do at home.
What Are Financial Analysts Saying About PetMed Stock?
The position of financial analysts for PetMed Express stock might best be described as “minimal.” The company currently has a consensus rating of “hold”, though that's a comparatively recent shift from “buy”. The biggest reason for the shift is that, as of December 2020, there was only one analyst covering PetMed Express, and that analyst recently shifted position. Just this morning, in fact.
A year ago, the company had one “buy” rating and one “hold” rating to its credit. The “hold” departed the market six months ago, and left us with just one “buy” rating. That “buy” was actually the only rating the company had altogether, and still was, until this morning. That “buy” rating was held by Sidoti, which downgraded PetMed Express from “buy” to “neutral”. Before that, the only other analyst in the picture was Craig Hallum, who back in October 2019 raised the company's price target from $15 to $20.
Since there is only one analyst with any perspective on PetMed Express at all, that makes the price target a lot simpler to work with. The average is the same as the high and low points, currently set at $41. With PetMed Express now significantly below that figure, there's some upside potential on this stock as based on the consensus of one.
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