Bear of the Day: Freshpet (FRPT)

Freshpet (FRPT) is a Zacks Rank #5 (Strong Sell) that is a pet food company that specializes in making fresh, refrigerated pet food for dogs and cats. Freshpet's products are made with real meat, vegetables, and other whole ingredients, and they are kept refrigerated to preserve freshness without the use of preservatives.The stock has taken a big hit since making all-time highs earlier this year. A combination of bad regulation news and a miss on EPS has the stock over 50% lower over the last three months.Unfortunately, the current situation does not look like a buy the dip opportunity. Investors interested in this name should remain patient.  About the CompanyFreshpet was founded in 20024 and employs 1,300.The company sells its products through a network of company-owned branded refrigerators, the Freshpet Fridges, as well as through various classes of retail, including grocery, mass, club, pet specialty, and natural, as well as online.FRPT is valued at $3.5 billion and has a Forward PE of 57. The stock holds Zacks Style Scores of “A” in Growth, but “F” in both Momentum and Value.  FDA NewsThe selling trend in Freshpet’s stock began shortly after the U.S. FDA’s January 17, 2025 announcement requiring pet food manufacturers covered by the PCAF rule to reanalyze their food safety plans to address Highly Pathogenic Avian Influenza (H5N1) as a foreseeable hazard.This regulation specifically impacts companies using uncooked or unpasteurized animal products—like Freshpet, which prides itself on minimally processed, fresh ingredients such as raw poultry and other refrigerated meats.Investors likely interpreted this as a material risk, since complying with the new rule could lead to increased production costs, additional regulatory burdens, and potential supply chain disruptions.These concerns may have undermined confidence in Freshpet’s growth strategy and profitability outlook, triggering a wave of selling in the stock.Q4 EarningsFreshpet's stock continued to move lower following its Q4 earnings report in late February. Despite showing solid year-over-year improvements, the company failed to meet investor expectations and raised concerns about near-term execution.The company reported adjusted earnings of $0.36 per share, missing the $0.44 consensus estimate, and revenue of $262.7 million, just shy of the expected $263 million.While Freshpet posted strong margin expansion, its initial FY25 revenue guidance of $1.18–1.21 billion came in slightly below the $1.21 billion estimate.Additionally, its projected capital expenditures of around $250 million for FY25 raised concerns about cash burn and the pace of investment.Earnings Estimates DropSince reporting earnings analysts have taken down estimates aggressively.For the current quarter, numbers have dropped 54% over the last 90 days, from $0.24 to $0.11.Looking at the current year, estimates have declined 13% in that same period, down from $1.50 to $1.30.For the next year, projections have been adjusted downward by 13% over the last two months, now at $11.12 from $14.73.Technical TakeThe stock is trading near 2025 lows, down 50% on the year. Price is below the 21-day moving average, which is currently at $80.50.The 50-day MA is currently at $92 and the 200-day MA is at $128.Investors should be patient and avoid the name until the bulls can get that 21-day back. Price has not been above that moving average since February 5th.In SummaryFreshpet’s sharp decline in recent months underscores the risks of high-growth, high-valuation stocks facing unexpected regulatory pressures and execution challenges.While the long-term vision remains ambitious, the near-term picture is clouded by heightened regulatory scrutiny, underwhelming earnings, and falling analyst estimates. Until Freshpet can demonstrate consistent execution and regain investor confidence, this is a name best left on the watchlist.For those interested in the Staples/Food space, a better option might be Celsius (CELH). The stock is a Zacks Rank #1 (Buy) that is trending off the 2025 lows.     Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Freshpet, Inc. (FRPT): Free Stock Analysis Report Celsius Holdings Inc. 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