Weak discretionary spending prompted a downgrade to "neutral" from "buy"
Citigroup downgraded Petco Health and Wellness Company Inc (NASDAQ:WOOF) to "neutral" from "buy" this morning, and lowered its price target to $12 from $15. The firm cited weak discretionary spending and the appeal of more affordable offerings.
Petco Health and Wellness stock is 4.5% lower to trade at $9.60 at last check. The shares have been trekking lower since their early February rally lost steam near the $12.50 region. Fresh off its fifth consecutive weekly loss, WOOF is well below the 20-day moving average and off 46.8% year-over-year.
Coming into today, eight of the 13 covering brokerages called the stock a "buy" or better, indicating there's ample room for pessimism to grow. Short interest has been on the rise, though, up 4% in the past two reporting periods. The 16.85 million shares sold short now make up 21.1% of the security's available float, or more than two weeks' worth of pent-up buying power.
A shift in the options pits could create additional headwinds. Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WOOF's 50-day call/put volume ratio of 9.24 stands higher than 94% of readings from the last 12 months, meaning long calls have been picked up at a quicker-than-usual clip.