We recently compiled a list of the 10 Best Pet Stocks To Invest In According to Analysts. In this article, we are going to take a look at where Zoetis Inc. (NYSE:ZTS) stands against the other pet stocks.

Pet Industry at a Glance

The pet industry is a rapidly growing sector. It was valued at approximately $320 billion in 2023 and is projected to reach nearly $500 billion by 2030, according to Bloomberg Intelligence’s Pet Economy Report. This growth is driven by a rising global pet population and an increasing trend of pet humanization, where owners treat pets as family members and are willing to spend more on their care, including premium food and health services.

The report notes that the US is positioned to remain the largest pet market. In the United States, the market is expected to approach $200 billion by 2030, with significant spending on veterinary care and pet healthcare products.

Ann-Hunter Van Kirk, Bloomberg Intelligence Senior Biopharmaceutical Analyst and co-author of the report, noted that improved pet nutrition is contributing to longer lifespans for pets, which in turn drives up spending on healthcare for aging animals. Analysts expect this trend of increased spending on pet health to continue over the next decade.

Diana Rosero-Pena, Bloomberg Intelligence Consumer Staples Analyst and co-author of the report, highlighted a notable rise in consumer spending on pet products, predicting that the pet food market could grow by more than 50% by 2030.

Shopping Trends Among Pet Owners

In April 2024, Acosta Group released the results of a new study highlighting important insights into pet parents’ shopping habits. With two in three US households owning at least one dog or cat, spending on pet food, treats, and healthcare has become a significant part of household budgets. The study found that 96% of pet parents consider their pets family members, and 86% are willing to adjust their budgets to accommodate their pets’ needs. This presents a valuable opportunity for retailers and brands to target this large audience.

The study also highlighted key preferences among pet parents regarding food choices. 42% prioritize high-protein content for their pets, followed closely by 40% who focus on joint care and 38% who seek probiotics for gut health. Additionally, 36% of pet parents are interested in fresh, minimally processed foods. Brand loyalty plays a significant role in purchasing decisions, with 57% of dog owners and 59% of cat owners sticking to brands they have previously purchased. However, impulse buying is common, especially among millennials, with 58% influenced by in-store promotions. Most pet owners are turning to mass retailers, pet specialty stores, and online retailers for their pet care purchases, indicating a shift in how pet care products are accessed.

Overall, the pet industry remains a vital part of the global economy, driven by strong consumer attachment to pets and an ongoing commitment to their well-being.

Our Methodology

To compile our list of the 10 best pet stocks to invest in according to analysts, we reviewed our own rankings and consulted various online resources. From an initial pool of more than 20 pet stocks, we focused on the top pet stocks that analysts believe have the most potential for growth. We ranked the 10 best pet stocks to buy based on their average price target upside potential according to analysts as of October 29, 2024.

Additionally, we mentioned the hedge fund sentiment surrounding each stock, which was taken from Insider Monkey’s database of 912 elite hedge funds as of Q2 of 2024.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Zoetis Inc. (NYSE:ZTS)

Average Price Target Upside Potential According to Analysts: 24.12%

Number of Hedge Fund Holders: 61

Zoetis Inc. (NYSE:ZTS) is an American animal health company that discovers, develops, manufactures, and commercializes vaccines, medicines, diagnostics, and other technologies for companion animals and livestock. It is one of the world’s largest producers of medicine and vaccinations for pets and livestock.

In the second quarter of 2024, Zoetis Inc. (NYSE:ZTS) reported a revenue of $2.4 billion, an 8% increase compared to the same period in 2023. The US segment generated $1.3 billion, reflecting a 12% growth driven by strong sales of companion animal products, particularly monoclonal antibody treatments for osteoarthritis pain, such as Librela for dogs and Solensia for cats. The international segment also performed well, with revenues of $1 billion, up 4% reported and 10% operationally.

The company is committed to innovation, recently gaining approvals for new products like a combination vaccine for Atlantic Salmon in Canada and a treatment for bacterial pneumonia in cattle in Japan.

Zoetis Inc. (NYSE:ZTS) is also enhancing its diagnostic capabilities with the upcoming launch of the Vetscan Opticell, a new point-of-care hematology analyzer set to launch in the second half of 2024. This innovative device will help veterinary teams save time, reduce costs, and optimize space in clinics, leading to improved patient care. Powered by advanced AI technology, Vetscan Opticell provides accurate Complete Blood Count (CBC) analysis directly at the point of care, ensuring high-quality results without the need for traditional methods.

The company’s ability to adapt to market needs and its diverse product portfolio makes it a strong investment choice. With continuous growth in both the companion animal and livestock sectors, Zoetis Inc. (NYSE:ZTS) is poised for future success.

Over the past ten years, Zoetis Inc. (NYSE:ZTS) has grown its revenue at a compound annual growth rate (CAGR) of 6.81%, while its net income has increased at a CAGR of 16.10% during the same period. Over the past 10 years, the company has also grown its levered free cash flow at a CAGR of 17.44%.

Analysts are quite optimistic about ZTS. Their 12-month price target suggests the stock could increase by 24% from its current level.

According to Insider Monkey’s database, 61 hedge funds held stakes in Zoetis Inc. (NYSE:ZTS) in the second quarter of 2024. Polen Capital stated the following regarding Zoetis Inc. (NYSE:ZTS) in its “Polen Global Growth Strategy” second-quarter 2024 investor letter:

“We re-established a position in Zoetis Inc. (NYSE:ZTS) after holding a position from late 2017 to late 2021. Our sale came after a successful holding period and was solely driven by valuation, which we felt was stretched at the time. We had an opportunity to re-establish a position at a lower price than we sold in September 2021 despite Zoetis having a roughly 25% higher earnings base. In short, we’ve taken advantage of the recent dip in valuation to buy back what we think is an attractive safety business capable of sustaining durable low double-digit earnings growth.”

Overall, ZTS ranks 6th on our list of the best pet stocks to invest in according to analysts. While we acknowledge the potential of ZTS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.