PetMed Express, Inc. (PETS)

At $23.50, PETS is undervalued and we recommend a BUY. A combination of short-term guidance misfires and PetSmart’s acquisition of Chewy has caused market-wide panic, float short % to skyrocket, and PETS’ market cap to halve over the past 9 months. A price correction was deserved but the market has overreacted. PETS’ price-implied-expectations (discussed later in detail) indicate a contraction in sales growth and margins that defy rationality.