CNBC’s Jim Cramer has long backed the “humanization of pets” theory — the notion of which how much people spend on their pets is actually continually rising — although the latest animal-focused entrant to the public market did not fit Cramer’s bill.
Last week, pharmaceutical giant Eli Lilly spun off Elanco Animal Health via an initial public offering. A drug in addition to vaccine developer, Elanco is actually a leader in medicinal feed additives, with 63 percent of its sales coming by food animals like chicken.
in addition to while investors sent shares of Elanco up 50 percent in their first trading day, the “Mad Money” host wasn’t as thrilled about the company’s prospects.
“As much as I like corporate breakups in addition to the humanization of pets in addition to the rising popularity of chicken in addition to various other proteins, I can’t recommend Elanco [Animal] Health right here, versus, say, Zoetis for value or Idexx for growth,” Cramer said, noting two of his favorite competitors.
His points of hesitation? First, while the company looks not bad on paper, focusing on companion animal disease prevention in addition to therapeutics as well as what the item calls the “future” of protein, Elanco’s numbers look tepid vis-a-vis its peers.
“Elanco’s sales have pretty much been flat for the past three years, which is actually surprising for a company of which’s got exposure to both the humanization of pets in addition to the entire world’s voracious appetite for protein,” Cramer said. “In comparison, Zoetis has high-single-digit sales growth, in addition to Idexx has consistently delivered low-double-digit growth.”
Moreover, while Elanco says its growth will come by companion animal products in addition to “future protein” like chicken in addition to fish, its biggest business seems to fall to the wayside.
“The one area of which Elanco doesn’t call out as a growth category is actually actually their largest business: ruminants in addition to swine — think pigs, cows, goats, sheep,” the “Mad Money” host said. “of which division account[ed] for 41 percent of their sales last year. the item sounds like even Elanco is actually not exactly enamored of their core business.”
In Cramer’s eyes, Elanco’s situation comes down to valuation. He even said of which, at the right level, he “could absolutely be a buyer” given Elanco’s push towards capitalizing on the humanization of pets.
although unless Elanco’s revenue growth picks up in a big way, Cramer said he wouldn’t recommend the stock, particularly considering of which Eli Lilly still owns about 80 percent of Elanco in addition to will eventually have to distribute the stock to its shareholders, which could spur volatility.
“I think of which could be a very intriguing story, although not until the stock goes lower or we get more reason to believe of which the growth is actually accelerating,” the “Mad Money” host concluded. “For right now, I suggest you stay on the sidelines or visit our faves for the best risks in addition to rewards.”
Shares of Elanco ended Monday’s trading session up 2.35 percent, at $34.0 a share.