What Happened?
Shares of pet-focused retailer Petco (NASDAQ: WOOF) jumped 3.1% in the afternoon session after Goldman Sachs highlighted the company as a key beneficiary of potential declines in debt costs.
According to a note from the investment bank, Petco is one of several companies whose earnings would receive a significant lift from lower interest rates. Goldman Sachs analysts estimate that for every 100 basis point, or one percentage point, decrease in the cost of debt, Petco's earnings could be boosted by slightly more than 5%. This positive outlook suggests that as borrowing costs potentially fall, the company's profitability could improve substantially, making the stock more attractive to investors looking ahead to the end of the year.
The shares closed the day at $3.78, up 3% from previous close.
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What Is The Market Telling Us
Petco’s shares are extremely volatile and have had 66 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 8.6% on the news that the major indices continued to retreat (Nasdaq -1.5%, S&P 500 -1.2%) amid profit-taking and renewed concerns about tariffs. Investors reacted to a federal court ruling that most of President Trump's global tariffs were illegal, raising uncertainty over trade policy and the fiscal impact of potential refunds. Rising Treasury yields added to the pressure, with the 10-year climbing above 4.2% and the 30-year nearing 5%, intensifying worries about stretched equity valuations. September's historically weak track record for stocks further dampened sentiment, leaving traders cautious ahead of the jobs report later in the week and the Federal Reserve's upcoming rate decision.
Petco is down 8.8% since the beginning of the year, and at $3.74 per share, it is trading 35.2% below its 52-week high of $5.77 from October 2024. Investors who bought $1,000 worth of Petco’s shares at the IPO in January 2021 would now be looking at an investment worth $127.22.
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