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Markets Irrationally React To Coronavirus, Creating Buying Opportunity For Zoetis

Mar. 04, 2020 4:58 PM ETZoetis Inc. (ZTS)6 Comments
Nick Schiavone profile picture
Nick Schiavone


  • Zoetis released strong 2019 Q4 and Fiscal Year End earnings on February 13, 2020, beating analyst estimates.
  • I adjusted my models after this recent earnings, but did not change my price target of $175.
  • Coronavirus fears have driven markets to correction territory, creating a buying opportunity for Zoetis.
  • New drug approval for Simparica Trio tablet will have positive effect on stock.

Zoetis Inc. (NYSE: NYSE:ZTS) is an animal healthcare company with impressive margins and significant upside potential due to recent market irrationality mispricing the company’s stock. The 52-week high/low for ZTS is $146.26 and $91.21, respectively. Currently trading at $136 (at the time of writing this article), down roughly 6% from $144.94 on Feb. 13, coronavirus fears have hit this company very hard. During the earnings call, Kristin Peck, CEO, stated, “there’s obviously some commercial risks… people are not currently bringing their pets to veterinarians… we’re watching our supply chain and are very confident we have adequate supply”.

The company beat earnings expectations, yet again, with their most recent annual report. ZTS reported quarterly earnings of $.92 per share, beating estimates of $.88 per share. ZTS also beat on revenue, generating $1.67 billion for the quarter, beating estimates by roughly 2.12%. The strong performance of ZTS can be seen in their overall outperformance of the S&P 500 and S&P 500 Pharmaceuticals Index.

Zoetis outperformance chart

Obtained from the company's most recent 10-K.

*A more in-depth analysis of their most recent reports have been included in my models below.

My Adjusted Models

I wrote my first ZTS article for Seeking Alpha on December 11, 2019. At the time of writing that article, ZTS was trading around $120 and based on my analysis, I put a long-term price target of $175 on the stock. I also priced in potential downside risk of 10%, which would have seen the stock hit around $105.

After following the company very closely over the last few months, I have continuously been adjusting my models. The three models I like to use to value companies are a comps analysis, a full-projection model, and a DCF. I have also adopted the use of a ratio analysis model, in which I compute liquidity, leverage, and profitability ratios (which I will discuss in

This article was written by

Nick Schiavone profile picture
Recent Towson University Graduate with a Bachelor of Science in Business Administration with a Concentration in Finance and an Economics minor.  Awaiting CFA Level 1 results (July 2021) seeking full-time employment opportunities in the Investments/Equity Research industry.At Towson, I was a member of the student-run Investment Group for three years.  Initially, I joined as an Equity Research Analyst where I was responsible for monitoring our portfolio holdings and finding investment opportunities.  My last year, I was promoted to Co-Portfolio Manager of the $300,000 Long-Only Equity portfolio where I was in charge of asset allocation.  Please feel free to reach out with any comments, concerns, or career advice, as I am always looking to learn more about the finance industry to prepare for a career on the buy-side.  If you like what you read, please also feel free to share my article!

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ZTS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

thanks for your timely analysis on the stock, as I was considering also initiating my position into this stock
People love their pets or family member. The new drug will work wonders and sub for 3. I see ZTS taking off. Especially if a dog or cat gets the virus. I bought on the dip.
bying Zoetis at 140 i wouldnt call a great oppurtunity, around 100 would do. I mean its a great company. forward adjusted pe at 35 not much room for error there and too much love at moment.
Doggggs profile picture
My largest holding. But poooof, the dip is gone...
Only if you are a trader and not long term investor
I couldn’t agree more! Great investment!
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