Petco Health and Wellness Company, Inc. (NASDAQ: WOOF) surged roughly 30% Thursday after Jefferies upgraded the pet retailer to “Buy” from “Hold,” saying the company has completed its turnaround and is poised for growth.

Jefferies said Petco enters fiscal 2026 with liquidity and profitability concerns largely behind it, and that the breadth of planned initiatives plays to the retailer’s strengths rather than relying on an improving macro environment.

“The heavy lifting is behind us,” analysts wrote, noting that Petco has transitioned from an urgent liquidity story to one focused on growth and return on invested capital.

The firm set a price target of $5, implying potential upside of 108% from the current $2.40 share price.

The turnaround has been underpinned by significant debt management, cost reductions, and operational improvements. In February, the company refinanced $1.5 billion of debt, extending maturities to 2031 and improving financial flexibility. Cash on hand totaled $257 million, with an untapped revolver, giving management room to reinvest.

Margins improved even amid a 2.5% decline in sales during fiscal 2025, with adjusted EBITDA of $408 million exceeding analyst expectations by 3%. Profit gains were driven by inventory reductions, store rationalizations, and a sharper focus on execution.

Looking ahead, Jefferies highlighted near-term growth drivers including expansion of fresh and frozen products, more national brand offerings, and updated product assortments supported by new advertising campaigns. Longer-term strategies involve cross-selling through veterinary and grooming services, expanding private-label food and supplies, scaling vet clinics and prescriptions, and revamping the loyalty program.

“These initiatives do not rely on a macro inflection,” Jefferies analysts noted. The firm projects adjusted EBITDA margins to reach 7.7% by fiscal 2028, roughly 100 basis points above current levels, and sees Petco trading at a discount to peers with further upside potential.