Rover.com, A SPAC You Can Sink Your Teeth Into

Another Hot Stock For The Pet Care Industry

Rover.com just hit our radar and it has already become a company of great interest to us. The company is a dog-centric platform connecting pet owners with dog services like dog walking, pet sitting, and boarding. What we like about it is that it is a pet care company and pet care trends suggest high single-digit to low double-digit growth over the next few years, it's eCommerce and e-commerce is growing by double digits if not triple digits this year, and it services. In our view, this combination sets the company up to become a leader in its niche and possibly a high-value takeover target for companies like Chewy.com (NYSE: CHWY).

Rover.com Reports Record Data Ahead Of Merger

Rover.com released its monthly booking data well ahead of its pending merger with SPAC Nebula Caravel Acquisition Company NASDAQ: NEBC and is causing quite a stir. The monthly total bookings were about 421,000 compared to 373,000 in the prior year. That's a gain of 12.8% from the prior year with new bookings topping 99000. More importantly, the grossest booking value came in at $56.6 million, or up 36% from last year to set a new all-time high. So far in the quarter, total bookings are running above 1 million with gross booking value tracking above $134.1 million or up 18% from last year. 

On a regional basis, North America was by far the strongest as European markets are still impacted by COVID-19 restrictions. The gross booking value in the UK fell 15% versus June  2019 while the greater European market is down 30%. In the US, most major markets are up double digits over the past two years led by New York at 22% and California at 14%. Elsewhere in North America gross booking volume in Canada is up 10%.

These figures are important because the SPAC values the pet-sitting platform at $1.60 billion. That's a little more than 2X the company's annualized revenue based on the latest monthly results and suggests the company may be undervalued. Competitor Chewy.com is trading at 3.7X its revenue outlook for this year and also producing fantastic growth. The risk for Rover.com is that the pandemic has drastically changed its business model and may adversely impact revenue going forward. The mitigating factors are that pet adoption and, in particular, dog adoption has skyrocketed during the pandemic and reopening activities may lead more pet owners to request services.

The Analysts Are Getting Excited

As early as it is in this company's transformation to a publicly-traded business the analysts are already getting excited. There have been two analysts so far to come out with ratings on the merger of Rover.com and its SPAC NEBC and they're both bullish. D.A. Davidson and Tigress Financial both initiated coverage with a buy and D.A. Davidson even set a price target of $17. That implies an upside of 70 % from recent price action and presents attractive speculation if not an opportunity to get into a valuable growth name ahead of the market. Looking at the chart, it appears as if shares of NEBC are trading at the bottom and ready for the next big catalyst. That catalyst will likely be the closing of the SPAC merger which is yet to be determined.