Wag! Group (NASDAQ: WAG) is a small penny-stock with less than $75 million in annual revenues, but its insiders are buying, and investors should be paying attention. Wag Group operates an app linking pet owners with pet-care providers and other services, and this is a big business. The pet care industry is valued at $136.8 billion in 2023, growing at a mid-single-digit CAGR driven by increased pet ownership and deepening penetration of pet services.

The “other” category in which Wag Group primarily operates is worth 8.3% of that and is growing at a mid-single-digit CAGR. That alone will sustain growth, but this is a highly fragmented market, and Wag Group is taking advantage of it. 

WAG Group insiders own about 21% of the stock and have been buying it in 2023. There are 5 purchases by 4 insiders on the Insidertrades.com tracking page, including a major shareholder, the CEO, the CFO and a director. This isn’t surprising, given the stock’s price implosion following the completed SPAC merger and the growth outlook.

The company is on track to grow its revenue and earnings by quadruple digits, even without the assumption it is dominating the industry and taking market share. The institutions are also buying; they own about 88% of the stock, making it a very tightly-held issue. Interestingly, the institutions have made no sales since the stock went public.

The Analysts See Triple-Digit Upside For Wag

There is competition for Wag, the primary being Rover which holds about 80% of the market share. Among the differences is that Wag Group is pivoting from pure services to a holistic platform to meet all needs. An example of this is the purchase of Dog Food Advisor.

The acquisition was an entry into the pet food business and is host to pet owners' unsolicited pet food reviews. The pet food business is almost 50% of all spending on pets, so it is expected to impact results in Q1. The acquisition will also bring in new customers, resulting in cross-selling opportunities. 

Analysts are bullish on Wag! and see it climbing higher as it gains market share and revenue. The 5 analysts rating the stock have it pegged at Moderate Buy with a price target of $6.75 or 200% above the current price action. That target is trending higher because the most recent update is $8.00, another 18.5% above the consensus. 

Wag! Group is expected to report earnings in mid-May, and the consensus figures present an opportunity for outperformance. The analysts expect to see a sequential downturn in revenue that contradicts the last 3 quarters of acceleration, double-digit outperformance in the previous quarter and an increase to the guidance.

As it is, the analysts' consensus for the year is below guidance. It opens the door for additional outperformance and positive adjustments to revenue and earnings targets if not the stock price target. 

“In 2022, we delivered all-time record results, significantly ahead of our expectations. This has been a pivotal period in the evolution of our company, as we transformed from a services business to a holistic platform for all of our Pet Parents’ needs,” said Garrett Smallwood, CEO and Chairman of Wag! Group.

Is Wag! Group At The Bottom? 

It looks like Wag! Group is at the bottom of its descent. The price action shows support at the $2.00 level that could provide a springboard for higher prices given a catalyst. That catalyst could be the Q1 results. If not, this stock may remain range bound at current levels until later in the year.