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- There have been countless knock-off effects of the COVID-19 pandemic, and one of them is increased pet ownership among US households, according to a Bank of America survey.
- Investors should take note, because the increased pet ownership boom could last longer than the COVID-19 pandemic, Bank of America said in a note on Thursday.
- Here are seven pet-related stocks investors should consider buying, according to the note.
- Visit Business Insider’s homepage for more stories.
As more and more employees work from home due to the COVID-19 pandemic, more US households are adopting pets.
That’s according to a Bank of America survey released in a Thursday note, which highlighted why investors should consider the accelerated trend of pet ownership.
Thirty-seven percent of its survey respondents adopted a pet in the last six months, “indicating a material increase in pet adoption during the COVID-19 outbreak,” BofA said.
Even before COVID-19, pet ownership has been on the rise for many years, as Gen X, Gen Y, and Gen Z continue to grow as a percentage of owners in the US.
Additionally, investors should take note because the recent “pet boom” trend could last longer than the COVID-19 pandemic does, as more people upgrade their living spaces, move to the suburbs, and stay home for longer, BofA said.
Here are seven stocks investors should consider buying to benefit off of the COVID-19 pet boom, according to BofA.
1. Chewy.com - $72 Price Target (31% Upside Potential)
Chewy.com is the prime beneficiary of both an increase in pet ownership and an increase in ecommerce trends.
"Chewy has been able to achieve scale despite going toe-to-toe with behemoth Amazon by differentiating itself with 1600+ pet specialist customer reps," BofA said, adding that its subscription-based growth model and niche positioning should allow the company to continue competing against Amazon.
2. Tractor Supply - $171 Price Target (22% Upside Potential)
"Almost half of TSCO's annual sales are in pet & animal categories, and Tractor Supply serves rural lifestyle customers who are generally homeowners/property owners and often have a large animal in addition to companion animals," BofA said.
3. Colgate-Palmolive - $85 Price Target (13% Upside Potential)
Colgate derives 15% of its overall revenue from its Hill's brand of pet food, which has grown 16% in the first half of 2020, BofA highlighted.
"Increasing pet ownership and innovation and improved digital capabilities and subscription/DTC (direct-to-consumer) programs are helping provide solutions to supplement in-person vet visits ... We expect this engine of growth to continue," BofA said.
4. Elanco - $28 Price Target (6% Upside Potential)
Elanco develops, manufactures, and markets pharmaceuticals for pets and livestock.
"Bayer Animal Health reported a strong start to 2020, with ~12% sales growth in 1H20, driven by a high exposure to companion animal products, particularly those sold through alternative channel (i.e., online, retail markets)," BofA noted.
5. IDEXX Laboratories - $440 Price Target (21% Upside Potential)
IDEXX provides diagnostic tools and reference lab services for veterinarians, and is No. 1 in both market categories, according to BofA.
"As IDEXX is essentially a pure-play companion animal business, the company should continue to experience the benefits of the veterinary services rebound, buoyed by this year's uptick in pet adoption in the US," BofA said.
6. Spectrum Brand Holdings - $65 Price Target (14% Upside Potential)
Spectrum Brand Holdings derives 25% of revenue from pet supplies, like dog treats and grooming and cleanser products, BofA noted. Specifically, Spectrum's Global Pet division saw 8.3% organic sales growth in its most recent quarter, BofA said.
"We expect Global Pet tailwinds to continue," BofA added.
7. Church & Dwight - $105 Price Target (15% Upside Potential)
"CHD is a global household products and personal care company with well-known brands like Arm & Hammer, which manufactures a wide range of products under the brand, including cat litter, which we estimate accounts for roughly 10% of the company's Consumer sales," BofA said.
