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Pets at Home share price forecast: Will PETS go up?

By Rob Griffin

Edited by Alexandra Pankratyeva

15:20, 1 June 2022

Pets at Home share price forecast: Will PETS go up? Illustration of the financial stock market chart, business investment concept and future stock trading.
Pets at Home share price forecast: Will PETS go up? Photo: whiteMocca / Shutterstock.com

Pets at Home (PETS) has seen its share price plunge 25% this year – despite announcing bumper results and predicting profits will rise over the coming year.

The UK-based company, which provides pet care goods and services, has been affected by concerns over the impact of rising living costs.

But does this provide an attractive entry point for traders or are further falls likely due to the ongoing global stock market uncertainty?

In this analysis, we take a look at the company’s recent results, examine its potential and ask industry observers what they expect the Pets at Home future share price to reach.

PETS stock analysis: What has been driving the share price?

It’s certainly been a tough year for the company’s investors. The PETS stock price stood at 466.2p at the start of the year but had sunk to 345p as the market closed on 30 May 2022.

According to Danni Hewson, financial analyst at AJ Bell, the company has been a victim of concerns surrounding the cost of living and the likely impact on retailers.

“Pets at Home has seen its valuation fall as investors back away from retail stocks expected to be hit by crippled consumer demand and narrowing margins,” she told Capital.com.

Looking back into Pets at Home share value for the last five years, we can see that the stock has been trading today at levels last seen in September 2020. Will it manage to regain the lost territory and repeat its high of 520p hit in September 2021? 

Pets at Home (PETS) five-year performance

Pets at Home fundamental analysis: Latest earnings

Pets at Home is benefitting from the UK being a nation of animal lovers. Devoted owners spend millions of pounds every year on food, bedding and veterinary bills.

This passion has seen group revenue hit £1.32bn for the 53 weeks to 31st March 2022 – up 15.3% on last year, according to the company’s latest results.

The number of active VIP club members now stands at a record 7.3 million, having increased by 1.1 million. That’s a year-on-year increase of 18% and 29% up on a two-year basis.

Pets at Home share dividends are paid twice a year usually in January and July. The company announced a dividend of 7.50p a share, an increase of 36% YoY. 

In a statement, Peter Pritchard, the outgoing chief executive, said performance was noteworthy for record sales, profit and cash flow.

“We are well placed to accelerate our growth in market share,” he said. “The robust backdrop of the UK pet care market, coupled with our clear strategic priorities, proven omnichannel model and strong executive team, mean that I hand over leadership of this great business to Lyssa McGowan with the utmost confidence that Pets at Home will continue to create value for all stakeholders in both the near and longer-term.”

Pets at home share price news: New chief executive appointed

Lyssa McGowan, who was unveiled as the incoming chief executive a few months ago, is due to take the reins on 1 June this year. 

At the time of the announcement, Adam Tomlinson, an analyst at Liberum, described the appointment as a “high quality, very experienced hire” for the business.

“Her consumer, subscription, and data/digital credentials are in sync with PETS self-help levers that give us confidence it can continue its impressive progress of the past few years,” he said.

McGowan joins from Sky UK, where she was chief customer officer.

PETS stock prediction: What’s the outlook for the company?

The company believes the pet care market remains “robust and in growth”, with registrations into its Puppy & Kitten club well ahead of pre-pandemic levels, according to its results statement.

Growth in customer spend is also being maintained across all categories and channels, with the focus being on making pet care affordable, easy and convenient.

Notwithstanding enduring industry wide inflationary pressures, in particular the impact of raw material, energy, and freight costs, the management anticipates that full year 2021 group underlying pre-tax profits will be in line with the current analyst consensus of £151m, with a range of £146m to £157m. 

Covid-19 fuels interest in pet ownership

In all, 26% of UK adults own a dog and 24% have a cat, according to the latest PAW report published by the People’s Dispensary for Sick Animals charity.

The number of pets in the UK in 2021

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It found that two million owners acquired their pets over a 14 month period from March 2020 to May 2021.

“While pet populations have stayed the same overall, it appears that a high proportion of people who got their pet in the first 14 months of the pandemic are new owners,” it stated.

The study found that lifestyle changes driven by Covid-19 restrictions were seen by some as a good time to get a new pet. 

“Increased home working and reduced travel for both holidays and work created more time for new owners to spend with their pets,” it stated.

PETS stock projection: What the analysts think

In a recent broker note, Jonathan Pritchard, an analyst at Peel Hunt, acknowledged how the company’s stock price had been weak this year.

“Pets at Home has fallen with the rest of the sector and downgrades are never helpful, but the scale of the share price fall is way worse than the downgrade,” he said. “This derating is unjust in our view and we reiterate our ‘buy’ case, just with a slightly lower target price.”

Adam Tomlinson, an analyst at Liberum, had a ‘buy’ recommendation on the stock and set a Pets at Home share price target of 510p.

“We see PETS’ earnings at relatively less risk than others due to the defensiveness of pet care spend,” he wrote in a recent note.

Matt Britzman, equity analyst at Hargreaves Lansdown, pointed out the “strong performance and balance sheet” meant investors are being rewarded with a £50m buyback.

“The UK pet market’s grown 4% per year on a compound basis over the past five years and continues to look strong as the pandemic fuelled surge in pet ownership doesn’t look to be going anywhere,” he said.

Of course, the wider economic problems must be considered. “Inflationary pressures are lingering in the background, but Pets at Home looks relatively resilient in face of those challenges with a large portion of goods sourced locally and costs initiatives in place easing the pressures,” he added.

AJ Bell’s Danni Hewson doesn’t believe the company will be immune to what’s going on but pointed out that the UK loves pets.

“More Brits than ever seem to have added an animal to their family thanks to the shift to home working brought about by the pandemic,” she said.

In addition, she believes the latest sales numbers might have “settled some nerves”, while the outlook will have been “a soothing balm” to existing shareholders.  

“The business has worked hard to pare down costs and upscale its offer and its loyalty scheme and vet database enable it to reach into our homes to promote services or tempt people into stores,” she said.

Pets at Home share price forecast: Where next for the stock?

So, are Pets at home shares a buy, sell or hold? The stock could be a ‘buy’ based on the opinion of seven analysts compiled by MarketBeat (as of 31 May). Their consensus forecast was that the stock could rise 39% to 478.57p over the coming year.

The highest forecast predicted a bumper increase of 67% to 575p, while the most pessimistic pencilled in a 4% fall to 330p.

Pets at Home (PETS) analyst ratings and price targets

Meanwhile, the algorithmic forecasts of Wallet Investor saw the stock as “an acceptable long-term (one year) investment” that’s expected to rise 6% to 366.15p over the next 12 months.

According to its Pets at Home share price forecast 2022, the stock could end the year at 359.173p. The site predicted that the price could reach 386.12p by June 2023, 472.67p a year later and 558.99p in June 2025. 

The five-year forecast for PETS stock was 707.14p – a 105% premium on the 345p at close on 30 May 2022. The site didn’t feature a Pets at Home share price prediction for as far ahead as 2030.

When looking for Pets at Home (PETS) stock predictions, it’s important to bear in mind that analysts’ forecasts and algorithm-based price targets can be wrong. Projections are based on making fundamental and technical studies of the PETS stock’s historical price pattern – but past performance does not guarantee future results.

It is essential to do your own research. Always remember that your decision to trade depends on your attitude to risk, your expertise in the market, the spread of your investment portfolio and how comfortable you feel about losing money. You should never trade money that you cannot afford to lose.

FAQs

Is Pets at home a good investment?

Whether PETS is a good investment will depend on your analysis of the stock. According to the algorithmic forecasting of Wallet Investor (as of 31 May), it could be an ‘acceptable’ one-year investment. Meanwhile, Wall Street analysts' ratings, compiled by MarketBeat, suggested the stock could be a ‘buy’. You should never trade money that you cannot afford to lose.

Will Pets at Home share go up or down?

No-one knows for sure. The consensus view of analysts compiled by MarketBeat, as of 31 May, saw the PETS stock rising 39% to 478.57p over the coming year. However, analysts can be wrong. Markets are volatile. You should do your own analysis before making any trading decision.

Why has the Pets at Home share price been falling?

Widespread concern about the impact on retailers of the cost of living crisis in the UK has weighed heavily on the PETS stock this year – despite it recording bumper results.

Markets in this article

PETSgbp
PETS AT HOME GROUP PLC ORD 1P
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-0.02 -0.660%

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