What Makes Petco (WOOF) a New Strong Buy Stock

Core Viewpoint - Petco Health & Wellness (WOOF) has received a Zacks Rank 1 (Strong Buy) upgrade, indicating a positive outlook driven by rising earnings estimates [1][4]. Earnings Estimates and Ratings - The Zacks rating system is primarily based on a company's changing earnings picture, with the Zacks Consensus Estimate reflecting EPS estimates from sell-side analysts [2]. - The Zacks rating upgrade for Petco signifies an optimistic earnings outlook, which is likely to lead to increased buying pressure and a rise in stock price [4][6]. Impact of Earnings Estimates on Stock Prices - Changes in a company's future earnings potential, as indicated by earnings estimate revisions, are strongly correlated with near-term stock price movements [5]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, influencing their buying and selling actions, which subsequently affects stock prices [5]. Recent Performance of Petco - For the fiscal year ending January 2025, Petco is projected to earn -$0.07 per share, reflecting a significant change of -177.8% from the previous year [9]. - Over the past three months, the Zacks Consensus Estimate for Petco has increased by 5.7%, indicating a positive trend in earnings estimates [9]. Zacks Rank System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. - Petco's upgrade to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [11].