According to Piper Sandler, Freshpet is one of the most exclusive foods in the pet food space. The company initiated the company with a buy rating and target price of $69, about 46% above the stock’s close on Wednesday. Analyst Michael Lavery wrote in a note on Thursday: “Freshpet’s sales have benefited as pet parents increasingly treat their pets as part of their human family and feed them. accordingly”. “Freshpet also outperformed the metrics with Gen Z and Millennials, two rapidly growing generations of pet owners. The runway for growth This continued trend will help drive further distribution momentum and increase sales. numbers, leading to organic revenue growth, according to Lavery.Freshpet could also get a boost from its new plant in Ennis, Texas, which is expected to open later in the quarter, according to Lavery, the plant. This will increase sales capacity to over $1 billion and support gross margins of around 52% once fully operational, Lavery said. working 12-hour shifts with overnight cleaning.” “If Freshpet could use about half of its current cleanup downtime for extended runs, we estimate a ~50% increase for given the revenue generated from Ennis and a potential EBITDA margin increase of ~500-600bps.” So far, Freshpet has raised prices twice this year and volumes have grown well. price more in the future to help its gross profit, according to Lavery. “Its brand spending is almost twice the average of our coverage, building equity that supports pricing power,” he said. One point to watch One area of concern for Lavery when it comes to Freshpet is the consensual second half EBITDA, where the pace doesn’t look right. “We expect EBITDA margins in 3Q22 to improve, due to lower Q2/22 one-time quality issue costs, lower fuel and freight rates (vs 2Q22) and rates of return,” he said. improved truck occupancy rate”. “However, media spending is likely to remain elevated until Q4 22 (when modest additional pricing also yields a small increase).” This is unlikely to be reflected in Wall Street’s estimates for the company – therefore, Piper Sandler expects margins to be lower in the third quarter of 2022 and higher in the next. — Michael Bloom of CNBC contributed to this report.