12:06 PM EDT, 05/24/2024 (MT Newswires) -- Petco Health & Wellness (WOOF) demonstrated a "good first step" in restoring credibility after its Q1 results exceeded analyst estimates, RBC Capital Markets said in a note.

"We expect investors to question whether this was a false start vs. Petco turning the corner, but with category trends seemingly bottoming, a new executive chairman, and a new CEO announcement pending, the setup screens interesting," RBC said.

Petco on Wednesday reported an adjusted Q1 loss of $0.04 per share on revenue of $1.53 billion. Analysts surveyed by Capital IQ expected a loss of $0.06 on revenue of $1.51 billion.

Petco delivered an "encouraging" modest improvement in discretionary trends, but "we suspect investors will want to see a few quarters of sequential progress before calling it a trend," RBC said.

The investment firm raised its price target on Petco to $3 from $2.70 and kept its outperform rating.

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