UBS Cuts Price Target on Tractor Supply (TSCO) Following Petsense Acquisition
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UBS reiterated a Buy rating on Tractor Supply Company (NASDAQ: TSCO), and cut the price target to $80.00 (from $88.00), following the company's acquisition of Petsense. The deal helps TSCO to gain a foothold in the specialty pet market by acquiring the 7th largest pet retailer in North America.
Analyst Michael Lasser commented, "While there might be an initial inclination to say an acquisition is the last thing that TSCO needs at this time, we think that would be unjustified. We think the deal simply plants a seed for the future. It helps TSCO gain a foothold in the specialty pet market by acquiring the 7th largest pet retailer in NA. With 136 stores located primarily in rural markets, Petsense's footprint is similar to Tractor's. Importantly, we think these stores can co-exist as existing cannibalization in overlap markets has been minimal. This should allow Petsense to reach its expected 1,000+ locations without interfering with Tractor's own target of 2,500. Though, assuming both banners reach their targets & Petsense does $1 mm per box, then its new banner would only make up 1/10 of total revenues. Thus, it’s not a huge needle-mover. Over time, we expect that TSCO’s core trends will stabilize and this growth vehicle will be additive without being distracting."
Shares of Tractor Supply Company closed at $68.24 yesterday.
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