Target Price Downgrade Pushes Freshpet to 52-Week Low: Buy Opportunity or More Downside?

Pet food manufacturer Freshpet (FRPT) hit a new 52-week low on Tuesday. It was the stock's 39th 52-week low of the past 12 months. 

On Monday, TD Cowen analyst Robert Moskow lowered his price target for the stock by 13% from $72 to $63. While that’s still above where it’s currently trading, it’s a big comedown from the previous target. Moskow’s concerns revolve around slowing growth and increased competition. 

As recently as January, FRPT stock traded at $164. Now trading below $60, value investors ought to be circling, evaluating whether the latest news is more of the same or something damning that should keep potential buyers away.

The company recently reported excellent Q2 2025 results that beat analyst estimates. Unfortunately for shareholders, it also lowered its sales growth estimate for 2025 to 14.5% at the midpoint from its previous guidance of 16.5%. 

Since the release of its earnings on Aug. 4 after the markets closed, its share price has fallen by 17%. Downward revisions by analysts haven’t helped.  

Value play or value trap? Beauty is in the eye of the beholder. 

The Business Remains Sound

One of the knocks against Freshpet in the past has been its inability to generate consistent profits. Growth was rarely an issue.  If you are a shareholder, you would rather see it have less growth and consistent earnings than more growth and no profits. At least I know I would.

In the second quarter, its adjusted gross margin was 46.9%, 100 basis points higher than in the same quarter of the previous year. Furthermore, it reiterated that it expects its adjusted gross margin to meet its target of 48% by 2027. Additionally, it anticipates its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin will reach 22% within three years. As of the second quarter, it was 16.8%.

Freshpet achieved this positive news, driven by a 12.5% year-over-year increase in sales, which was primarily due to higher volumes rather than price increases. 

“Against a more challenging consumer sentiment backdrop, we continue to significantly outperform the dog food category - delivering both category leading sales growth and strong improvements in operations,” commented Billy Cyr, Freshpet’s Chief Executive Officer.

As of June 30, it had total debt of $495.2 million, which was a reasonable 17.5% of its currency market capitalization. More importantly, its trailing 12-month EBIT (earnings before interest and taxes) is $55.3 million, 4.0 times its interest expense, the highest in the past decade.

Lastly, according to S&P Global Market Intelligence, its Altman Z-Score — the likelihood of entering bankruptcy proceedings within the next 24 months — is 6.79, well above the 1.81 score required to be considered solvent. 

There’s no question it faces headwinds from the tariff situation, both in terms of its own input costs and what consumers are willing to bear in this economic environment. 

Sales Guidance Slows

As I mentioned earlier, Freshpet's share price fell by 17% since announcing its earnings at the beginning of August. A significant reason for the drop was the company's reduction in its sales growth forecast for 2025 by 200 basis points to 14.5%. Equally consequential, as a result of the slower growth in 2025, it withdrew its 2027 sales projection of $1.8 billion.

With this new information, investors and analysts naturally reworked their valuations. I already mentioned that TD Cowen lowered its 12-month price target to $63. Other firms lowering target prices included Truist Financial, which dropped its target by $10 to $80, and Benchmark, which reduced its target by $20 to $120, while maintaining its Buy rating.   

Assuming Freshpet achieves its 14.5% sales growth in 2025, it will generate revenue of $1.17 billion in 2025. It currently trades at 2.42 times revenue. Its enterprise value of $3.08 billion is 2.63 times its projected 2025 revenue. That is the lowest multiple since March 2017. 

In addition to the headwinds faced from an uncertain global economic and trading environment, there is also the threat of new competition. 

On that front, General Mills (GIS) announced in June that it was entering the fresh pet food market with the launch of “Love Made Fresh” later in 2025. It is the largest U.S. manufacturer of pet food to enter the $3 billion fresh pet food space. At the same time, General Mills announced that it was bringing Edgard & Cooper to the U.S., its European super-premium pet food brand, which it acquired in 2024 for $436 million. In partnership with PetSmart, the brand launched in July. 

Both the tariff situation and competitive threats are out of the company’s control. Naturally, though, investors fret about this. It is what it is. 

The Bottom Line on Freshpet

Is it a value play or a value trap? I would argue that it’s the former, not the latter. Here’s why I feel this way. 

Freshpet went public in November 2014 at $15 a share. Its market cap at the time of its IPO was $500.4 million based on the 33.4 million shares outstanding. In the 12 months ended Dec. 31, 2013, it had annual sales of $63.2 million. 

Therefore, the company’s projected 2025 revenues of $1.17 billion are 18 times higher than they were before the company's initial public offering. Yet its market cap is less than six times larger. 

Further, it had an EBIT loss of $10.4 million in 2013. In 2024, Freshpet’s EBIT profit was $38.6 million, surpassing the combined total of the 10 years prior. In addition, its estimated EBITDA profit of $200 million in 2025 will likely be its best year yet from a bottom-line perspective. 

As Warren Buffett would say, “Be greedy when others are fearful.”