Investing.com -- Oppenheimer downgraded Freshpet Inc (NASDAQ:FRPT) to "Perform" from "Outperform," citing a weaker-than-expected start to the year and more cautious management commentary. The firm believes investors should wait for clearer signs of revenue stabilization before considering a potential turnaround.
“We now find it harder to call a bottom in shares and view the risk/reward as balanced,” analyst said as it removed the previous $140 price target.
Oppenheimer has also trimmed its sales estimates for Freshpet, now expecting full-year growth to align with first-quarter trends.
The firm noted that Freshpet shares have historically bottomed at around three times price-to-sales, which could suggest further downside into the $70 range. Given recent momentum at Chewy (NYSE:CHWY), Oppenheimer now views the pet retailer more favorably than Freshpet in the near term.
Despite the downgrade, Oppenheimer still considers Freshpet a potential acquisition target over the longer term.
However, in the current market environment, where investors are shifting away from high-risk names, the firm sees limited upside in the stock.
Freshpet was also removed from Oppenheimer’s top consumer staples picks, which now include more defensive names such as Church & Dwight (NYSE:CHD), Prestige Consumer Healthcare, and Walmart (NYSE:WMT), as well as discretionary stocks like Target (NYSE:TGT) and Ulta Beauty (NASDAQ:ULTA).
Although Freshpet has long-term growth drivers, including product innovation, household penetration, and global expansion, Oppenheimer sees near-term challenges.
With disappointing guidance at the recent Consumer Analyst Group of New York (CAGNY) conference and a more cautious tone from management, the firm believes it is prudent to take a wait-and-see approach before expecting a reacceleration in sales.