On Wednesday, Stifel, a financial services firm, increased its price target on shares of Freshpet (NASDAQ:FRPT) to $95 from $91, while reiterating a Buy rating on the stock. The adjustment reflects the firm's confidence in the company's ability to meet consensus expectations for sales and adjusted EBITDA in 2024.
Stifel's analysis suggests that Freshpet's sales growth will align with its long-term targets, forecasting a 25% increase. This projection includes high-teens volume growth, approximately 5 percentage points from untracked channels, and a low-single-digit mix benefit. The firm expects stronger sales growth in the first half of the year.
The report from Stifel also points to ongoing expansion at Costco (NASDAQ:COST) as a significant factor contributing to sales growth in untracked channels. They estimate this could add 4-5 percentage points to Freshpet's sales growth in the second half of 2023, increasing to 5-6 points in the first half of 2024, and then slightly decreasing to 3-4 points in the second half of 2024.
The anticipated growth in adjusted EBITDA is expected to stem from gross margin expansion and SG&A expense leverage, according to the financial services firm. These factors underpin the firm's decision to maintain a positive outlook on Freshpet's shares.
Stifel's revised price target of $95 reflects a valuation of 4 times the forecasted 2025 sales for Freshpet. This adjustment underscores the firm's view that the pet food company's financial performance will continue to strengthen over the coming years.
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