Animal health market opportunity
Founded in 1996, PetMed Express (PETS) is a leading pet pharmacy located in Florida. It delivers prescription and non-prescription pet medications and other health products for dogs and cats.
Its prescription products include treatments for heartworm, arthritis, thyroid, and diabetes. PetMed Express also carries flea and tick preventives, pain medications, antibiotics, specialty medications, and generic substitutes.
The company’s non-prescription, over-the-counter medications include flea and tick control products, bone and joint care products, nutritional supplements, hygiene products, vitamins, treats, and supplies.
Customers can order products through three channels—the company’s website, its telephone order center, and direct mail. Products are drop shipped to customers by third-party vendors. The company’s product line comprises ~3,000 stock keeping units (or SKUs) of popular products in its Companion Animal segment.
Pet spending in the US
According to the American Pet Products Manufacturers Association (or APPMA), pet spending in the US increased 10.7% to reach $66.8 billion in 2016. Pet supplies and medications represented $14.7 billion, or 22.0% of the total spending on pets.
PetMed Express (PETS) is currently targeting segments of the pet medications market with a total value of ~$4.3 billion. The dog and cat population totals ~184.0 million in the US, with ~68.0% of all households having a pet. This highlights the scope of opportunity available for PetMed Express in the US.
Analysts’ recommendations for PETS and its peers
Of the five Wall Street analysts covering PetMed Express (PETS) in October 2017, two gave it “strong buy” ratings, two gave it “hold” ratings, and one gave it a “sell” rating. The mean rating is 2.4 with a target price of $43.75.
PetMed Express recomprises ~0.09% of the iShares Core S&P Small-Cap ETF’s (IJR) total portfolio holdings.
Of the 21 analysts covering Zoetis (ZTS), 66.0% gave the company a “buy” or higher rating while the rest rated it as a “sell.” Of the 14 analysts covering Patterson Companies (PDCO), ~35.0% gave it a “buy” or a higher rating. Of the eight analysts covering Rite Aid (RAD), one gave a “buy” rating, and seven gave it a “hold” rating.
In the next part of this series, we’ll look at PetMed Express’s strategy for acquiring new customers.