Petco Health & Wellness Company Inc. (NASDAQ:WOOF) is one of the cheap penny stocks to invest in. On December 2, Goldman Sachs lowered the firm’s price target on Petco to $4.53 from $5.14 with a Buy rating on the shares. The firm noted that Petco exceeded Q3 2025 expectations and is positioned to grow its top line in 2026. Goldman Sachs’ strategy centers on its services business, which acts as a unique differentiator.
Earlier on November 26, Morgan Stanley lowered the firm’s price target on Petco to $3.75 from $4.50 and kept an Equal Weight rating on the shares. The firm noted that Petco faces persistent hurdles due to an intense competitive landscape and a sluggish macroeconomic environment. These external pressures have obscured the timeline for a definitive rebound in sales and further gains in profitability, leading to a cautious outlook.
In Q3 2025, Petco Health & Wellness Company reported that the company’s net sales fell 3.1% to $1.46 billion, and comparable sales decreased by 2.2%, but the adjusted EBITDA rose 21% to $99 million, with the corresponding margin expanding by ~1.4% to 6.7%. This turnaround was driven by a 0.75% expansion in gross margin to 38.9% and a disciplined $32 million reduction in SG&A expenses, which provided 0.97% of expense leverage.
The company’s strategic pivot away from unprofitable sales and its focus on high-margin services are core to its transformation. While the products segment saw declines, the Services and Other category grew to $255 million. A standout highlight was the veterinary business, where Petco is ahead of its hiring goals with record-high doctor retention. Operationally, the company ended the quarter with 1,389 US stores following nine net closures year-to-date, though it plans to slow the pace of closures as it targets a return to growth in 2026.
Looking ahead, Petco raised its full-year 2025 Adjusted EBITDA outlook to between $395 and $397 million, while tightening its net sales forecast to a decline of 2.5% to 2.8%.
Petco Health & Wellness Company Inc. (NASDAQ:WOOF) operates as a health and wellness company that enhances the lives of pets, pet parents, and its Petco partners in the US, Mexico, and Puerto Rico.
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