Animal Healthcare Is Barking Up the Right Tree – Morningstar

Idexx and Zoetis have profited from pandemic pets, but their valuations remain high.
The COVID-19 pandemic caused a mismatch between supply and demand in the pet market, much as it did for toilet paper, exercise bikes, and more recently, semiconductors. The intake of dogs and cats at animal shelters fell dramatically, by 40% and 33%, respectively, as shelter-in-place orders dominated spring 2020. This put a major squeeze on supply just as demand for pets went through the roof. As a result, the adoption rate of this smaller pool of animals spiked to 60%-70% during spring 2020, compared with typical levels in the mid- to high 50s. We estimate there was a 13% net increase in dog adoptions in 2020 year over year, based on consolidated shelter data and American Kennel Club records. It is less clear what the rise in cat adoptions was as there is simply less reliable data.
Debbie Wang does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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