Freshpet (NASDAQ:FRPT) shares climbed 63 basis points in premarket activity on Monday after DA Davidson reaffirmed a Buy rating and kept its $98 price target, saying recent competitor news does not warrant the recent share selloff.
The stock had retreated in prior sessions after reports that The Farmer’s Dog will debut on Walmart.com in April and after market discussion of a possible Kirkland-branded fresh pet food product at Costco. DA Davidson described the pullback as an overreaction to headlines that have limited bearing on Freshpet's underlying business.
DA Davidson's assessment
DA Davidson said it views the string of headlines as lacking substantial weight relative to strengthening consumption trends for Freshpet products. The firm stated in its note: "A spate of headlines without much weight behind them, against firming consumption trends, makes for a compelling setup; as such, we are pounding the table on FRPT-BUY."
The firm acknowledged the unpredictability of daily news flow but said each new development can be evaluated for its likely effect on fundamentals - and, in its view, the recent items show "very little cause for concern."
Three points cited by DA Davidson
- Bloomberg Second Measure credit card data indicate The Farmer’s Dog has been growing at less than half the rate of Freshpet over the past 12 weeks.
- The Farmer’s Dog’s cost to feed a 40-pound dog was cited at $6.97 per day, which the firm said is roughly 2.4 times the daily cost of Freshpet’s top-selling SKU at Walmart.
- DA Davidson believes The Farmer’s Dog faces hurdles expanding into brick-and-mortar distribution because its direct-to-consumer model relies on customization, which may not translate easily to in-store execution.
BofA's perspective
Bank of America noted that the recent competitor product announcements have raised questions about Freshpet’s competitive moat, particularly regarding how easily rival products could be offered at lower price points. At the same time, BofA observed that the launches illustrate category legitimacy and retailer willingness to carry fresh pet food, which could support broader category growth and present additional opportunities for retailers.
Market takeaway
Investors reacted modestly in premarket trading to the analyst commentary, with DA Davidson framing the earlier selloff as headline-driven rather than rooted in fundamental deterioration. BofA's comments underscored a nuanced view: competitive pressure is a concern, but retailer acceptance may validate demand for fresh pet food more broadly.
Summary
DA Davidson reiterated a Buy on Freshpet with a $98 target and argued that recent competitor announcements - including The Farmer’s Dog’s planned Walmart.com launch and chatter about a Kirkland product at Costco - have limited fundamental impact. The broker cited credit card data, price comparisons, and distribution challenges for The Farmer’s Dog as reasons the risk to Freshpet appears minimal. Bank of America recognized concerns about Freshpet’s moat but said the competitor moves show category validation by retailers.