Chewy (NYSE:CHWY), Inc. CHWY is an e-commerce pet store that went public in 2019 and its stock price soared off the initial coronavirus lows until February 2021. Since then, Chewy shares have mostly tumbled amid slowing growth and a wide-ranging recalibration of pandemic high-flyers.
E-Commerce Pet Store Basics
Chewy, like all pet stores, sells pet food, supplies, treats, medications, and more for a variety of animals. The company has capitalized on the broader e-commerce expansion over the past decade. Chewy’s strength is largely based on its ability to add loyal pet owners to its Autoship business that allows people to have food and more delivered at regular intervals.
Chewy posted a banner year in 2020 and it’s expanded its offering to include telehealth, a beefed-up pet pharmacy platform, and more. But Wall Street has dumped the stock in a post-lockdown world amid rising costs and slowing growth.
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Recent Performance and Outlook
Chewy ended Q3 with 20.4 million active customers, up 15% YoY. The company also reported a smaller-than-projected Q3 loss on December 9 (-$0.03 vs. -$0.05 per share) and its revenue popped 24%. But it still faces challenges in the form of “ongoing supply chain disruptions, labor shortages, and higher inflation.”
Chew’s revenue climbed 37% in 2019 and 47% in covid-boosted FY20. Looking ahead, current Zacks estimates call for its FY21 revenue to jump another 25% to $8.9 billion, with FY22 projected to pop 20% higher. Along with slowing top-line growth, its adjusted FY21 earnings are projected to slip 22%.
Bottom Line
Chewy’s earnings estimates have trended heavily in the wrong direction since its recent release, with its Most Accurate Zacks estimates (the most recent) coming in way below its recently-lowered consensus estimates. These downward revisions help CHWY land a Zacks Rank #5 (Strong Sell) right now. And its Consumer Products – Staples industry is in the bottom 5% of over 250 Zacks industries right now.
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Chewy stock did jump at the end of last week, following a post-release selloff. The positivity continued Monday, but CHWY is still trading below where it was before its Q3 release and remains over 50% under its mid-February records.
Chewy’s recent pop could be linked to some technical-focused trading, after it fell into oversold RSI territory (30 or under) last Thursday. The stock could continue to gain some momentum, but it’s still miles under its 50-day and 200-day moving averages.
Chewy might be more of a day trader-style stock until it can sustain a bit more of a comeback. And it’s worth pointing out that Wall Street is currently betting rather heavily against the stock—short interest at roughly 20% of the float.
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