Freshpet's Q2 Performance: Analyst Uplifts Price Target And Forecasts Strong Volume Growth

Truist Securities analyst Bill Chappell reiterated the Hold rating on Freshpet, Inc. FRPT, raising the price target to $80 from $55.

FRPT recently reported second-quarter FY23 sales growth of 25% year-on-year to $183.30 million, missing the analyst consensus estimate of $185.75 million. Both velocity gains and pricing drove net sales.

The analyst notes that this was a solid quarter with sequentially improved volume growth driven by increased capacity and stepped-up marketing spending. 

Management indicated the volume growth has continued into 3Q and remains comfortable that it can hit its 26% Y/Y top-line growth goal for 2023 despite lapping significant pricing taken in 2022. 

Over the past few quarters, the analyst doubted that volume growth could fully offset the lapped pricing even with stepped-up marketing.

In fact, the analyst underappreciated distribution gains, from which the company is earning this year, and the true sales potential when the capacity is not constrained.

The company expects FY23 adjusted EBITDA of at least $55 million. It sees capital expenditures of about $240 million.

The analyst raised FY23 EBITDA estimates from $50 million to $57 million. For FY24, Chappell raised EBITDA estimates from $91 million to $98 million.

Price Action: FRPT shares are trading lower by 2.45% to $80.24 on the last check Tuesday.