Freshpet (FRPT) is well positioned in the fast-growing refrigerated fresh pet food segment, but short-term topline growth is likely to remain constrained as affordability pressures weigh on dog ownership and premium pet food trade-up, Morgan Stanley said in a Tuesday note.

Management is scaling back capital expenditures and expanding value-oriented offerings, now expecting to turn free cash flow positive in 2025, a year ahead of plan, though Morgan Stanley sees cash flow remaining modest over the medium term due to the company's capital-intensive model.

According to the report, Freshpet's retail sales growth has decelerated sharply, with no clear near-term catalyst for reacceleration until consumer conditions improve.

The brokerage noted that shares already reflect about 10% annual sales growth and significant margin improvement through 2028, which it considers reasonable given limited near-term visibility.

Analysts added they could turn more bullish on Freshpet if pet spending, distribution/e-commerce, or manufacturing technology progress improves.

The firm initiated an equal-weight rating on the stock with a price target of $71.

Shares of Freshpet were up 1.6% in recent trading.

Price: 64.57, Change: +1.01, Percent Change: +1.59