Freshpet ‘s Valuation Might Start to Matter Soon

Bearish   

Freshpet Inc. is a ~$6B pet food and treats manufacturer, founded 20 years ago and headquartered in Secaucus, NJ. The company went public in 2014 and has been a wonder to behold until May of 2021, when the stock reached an all-time high of $187 a share. The following fourteen months, on the other hand, were a complete disaster from which the share price still hasn’t fully recovered.

Between May, 2021, and September, 2022, Freshpet stock plunged 81% from $187 to $36. Despite the company’s high revenue growth of over 30% a year, that crash actually made sense. That’s because FRPT is a cash-burning business. It wasn’t until the last two quarters when it finally showed a profit, albeit only an accounting one, since free cash flows remain deeply negative. Not to mention that Freshpet no longer has a pristine balance sheet after loading up on nearly $400m of debt in 2023. So the more surprising thing is the stock’s recovery from the 2022 bottom of $36 to over $136 earlier this month, not the preceding collapse.

Currently near $117 a share, Freshpet trades at over six times sales and 160 times its estimated 2024 earnings. Valuation doesn’t matter until it does. For FRPT investors, it soon might.

Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

Freshpet stock daily chart Elliott Wave analysis

The Elliott Wave chart above reveals that Freshpet stock is ripe for another notable selloff. It shows that the crash from $187 to $36 took the shape of a five-wave impulse pattern, labeled 1-2-3-4-5 in wave (A). According to the theory, a three-wave correction follows every impulse. Here, there is a simple A-B-C zigzag in wave (B) up to the 61.8% Fibonacci resistance level. Wave B was an (a)-(b)-(c) running flat correction, where the a-b-c structures of waves (a) and (b) are also clearly visible.

If this count is correct, Freshpet is headed significantly lower in wave (C), whose targets lie below the bottom of wave (A). This puts the sub-$30 area within the bears’ reach in the months ahead. From the current price of ~$117, that’ll be an 80% decline, again. Especially if a recession hits, the stock prices of fast-growing, yet unprofitable and debt-laden companies are the most vulnerable. Freshpet ticks all the boxes.

In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery