Michael Burry is Bullish on This Beaten-Down Healthcare Stock. Time to Buy?

Fahad Saleem

Tue, August 18, 2026 at 5:19 PM GMT+3 3 min read

Zoetis (NYSE:ZTS) is an animal health company. Michael Burry is long the stock, several media outlets reported, citing his Substack disclosures. The stock is down about 40% so far this year. Let's break down whether it's worth buying.

Why Burry Likes It

Burry's pitch is simple. Zoetis has dropped more than 70% from its 2021 peak. Burry thinks the company brings in better gross margins and has less debt than its peers.

Why the Stock Cratered

Competition is impacting the stock. Elanco and Merck are taking share in dermatology and parasite treatments. US pet owners cut back on vet visits amid inflation. The company has slashed its guidance amid weaker trends.The Latest EarningsIn fiscal Q2 2026, revenue was roughly flat and down about 1% organically. US revenue fell 7%. International revenue grew 6%. Adjusted EPS still grew 4% amid stock buybacks.Recently, the FDA granted emergency use for Simparica Trio to treat New World screwworm in dogs. The stock popped on the headline.

Michael Burry of Scion Asset Management

Can The Stock Rebound?

Zoetis trades near 12 times forward earnings, compared with a historical average of 30 times. The dividend is the highest it has ever been for the company, near 3%, with a payout ratio in the low 30s.As of the last quarter, Zoetis had about 86% of the US market for pet skin drugs, even after losing ground. Gross margins sit above 70%. Return on equity runs around 65%. The pipeline has several candidates in areas like kidney disease, pain, and obesity, and new drugs Lenivia and Portela are rolling out in Canada and Europe.Insiders are buying too. Earlier this year, directors picked up stock on the open market during the slide. See the stock's insider buying activity here.

The Bear Case

Competition is not going away and it's rising. New rivals keep chipping at dermatology and parasite sales, and Zoetis has no quick fix. Pipeline drugs take years to matter.The company also carries a heavy long-term debt load that has grown over the past few years. It is manageable while profits hold, but it limits flexibility if earnings keep sliding. And a longer-term threat looms: smaller biotech players could use AI to build cheaper copycat treatments and eat into Zoetis's high-margin categories.

What Wall Street Thinks

Analysts stay mostly bullish, with a buy-equivalent consensus rating. The average price target sits well above the current price, pointing to roughly 70% upside if the business stabilizes.While we acknowledge the risk and potential of ZTS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZTS and that has 10,000% upside potential, check out our report about the cheapest AI stock.READ NEXT: 33 Stocks That Should Double in 3 Years and Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy. Disclosure: None. Follow Insider Monkey on Google News.