Petco Jumps Despite Market Declines; Google Buys Mandiant

Petco Jumps Despite Market Declines; Google Buys Mandiant

Earnings and M&A activity continue to drive action in individual stocks.

The stock market remained on guard on Tuesday morning, with the investment climate remaining uncertain amid geopolitical and macroeconomic pressures. As of 11:30 a.m. ET, the Dow Jones Industrial Average ( ^DJI 1.68% ) was down 119 points to 32,699. The S&P 500 ( ^GSPC 1.62% ) had fallen 24 points to 4,177, and the Nasdaq Composite ( ^IXIC 2.39% ) had dropped 81 points to 12,750.

Even a difficult market environment isn’t stopping investors from responding to the latest news affecting their individual companies. Petco Health and Wellness ( WOOF 8.65% ) saw a nice gain after the pet specialist reported strong quarterly results. Meanwhile, Mandiant ( MNDT -2.18% ) gave back some ground after rumors of a big deal turned out to be true. Image source: Getty Images. Petco isn’t just all bark

Shares of Petco were up nearly 8% Tuesday morning. The pet retailer reported record revenue and profits in fiscal 2021 and expects further gains in the coming year.

Petco’s fourth-quarter financial report showed the momentum the company has built. Revenue for the quarter climbed 13% year over year, with comparable sales climbing 14%. That completed a year of 18% overall sales growth for fiscal 2021, and it marked the seventh straight quarter in which comps were up at least 10%. Adjusted earnings of $0.28 per share were 65% higher than in the previous year’s period.

CEO Ron Coughlin heralded the results, noting the strength of the pet industry over the past couple of years. Moreover, Coughlin sees Petco as building up competitive moats that will keep it ahead of rivals, including nearly 200 veterinary hospitals providing valuable services to complement its product lineup.

Petco sees the good times lasting well into fiscal 2022, with revenue expected to rise to between $6.15 billion and $6.25 billion and adjusted earnings of $0.97 to $1 per share. That would represent slower growth than Petco has seen in the past year, but it would still mark ongoing progress toward taking a leadership role in its niche. Mandiant gets snapped up

Meanwhile, shares of Mandiant were down 2%. However, that followed a 16% upward move on Monday, which reflected rumors that turned out to be true that the cybersecurity company would attract an acquisition bid.

Mandiant announced early Tuesday that Alphabet ‘s Google division had agreed to acquire the cybersecurity company for a total value of $5.4 billion. The terms of the deal will pay Mandiant shareholders $23 per share in cash, with the expectation that the acquisition will get completed at some point during 2022.

For Alphabet, the acquisition will strengthen the security features of the Google Cloud platform, which has worked hard to compete against fellow industry giants Amazon and Microsoft . By being better able to help client businesses address all of their cybersecurity needs, Google Cloud hopes it will attract more enterprise customers and demonstrate a competitive advantage against its rivals.

Investors have speculated for roughly a month that Mandiant would find a buyer, but early reports suggested it might be Microsoft rather than Google that would end up making a move. More definitive reports naming Google came out before the close of trading on Monday, and that’s why today’s share price decline seemed to fly in the face of what’s usually good news for shareholders.

Consolidation is likely to continue in the tech industry, especially in light of big price declines for many small-cap tech stocks. It will be interesting to see how Microsoft and Amazon respond as cybersecurity plays an increasingly important role in cloud computing and digital transformation. Should you invest $1,000 in Petco Health and Wellness Company right now?

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