Now's The Time To Load Up On Chewy, A Perfect Stock For Pet And Profit Lovers
Andy Hecht | Sep 14, 2021 06:09
This article was written exclusively for Investing.com.
- Incredible rise from the March 2020 low to the February 2021 high
- Chewy’s customer service puts it at the top of the pet supplies business
- Correction from February through May 2021; a rally to a lower high in August
- Q2 earnings: Disappointing, but a rare miss
- Revenue growth, shrinking losses say buy the dip; Most analysts are bullish
Chewy (NYSE:CHWY), the Dania Beach, Florida-based e-commerce business that provides pet foods and treats, pet supplies, pet medications, and other pet-health products for dogs, cats, fish, birds, small pets, horses, and reptiles via its chewy.com retail website has been in business since 2010. CHWY offers approximately 70,000 products from 2,500 partner brands.
The global pandemic that began in 2020 lifted profits for many online companies, and Chewy is no exception. At $73.64 per share as of yesterday's close, CHWY’s market cap was around the $30.8 billion level.
On average, the company trades over 3.3 million shares each day. Chewy is a highly volatile stock. CHWY opened for trading in June 2019 at $37.60 per share. The range since its listing has been from $20.62 to $120.00.
Chewy recently dropped after its Q2 earnings disappointed as they came in below market expectations. However, the decline could be a buying opportunity for the company that shows pet owners how much they care, with customer service that is more than a notch above retail competitors.
h2 Incredible rise from the March 2020 low to the February 2021 high/h2CHWY shares experienced a parabolic rise following the pandemic-inspired Mar. 9, 2020, $20.62 low.
Source: Barchart
As the chart highlights, CHWY shares rose nearly five times to a high of $120 by mid-February 2021. The global pandemic created an almost perfect bullish storm for the e-commerce pet supplies company as the customer base grew. Delivery of pet food, medicines, and supplies became a must during the height of the pandemic.
h2 Chewy’s customer service puts it at the top of the pet supplies business/h2Customer service is critical in building a loyal customer base. From personal experience, I can attest that Chewy is a cut above in the e-commerce sector.
Our cat Gia requires a special diet that needs a veterinarian’s prescription. We began ordering from Chewy sometime in late 2020. The delivery has been swift and efficient.
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Moreover, when the prescription ran out and needed renewal, CHWY was on point in assisting us, so Gia did not go without her required nutrients. Furthermore, each time we call, the representative personalizes the conversation, asking how Gia is doing and if they can help.
Friends and colleagues have had an equally pleasant experience with Chewy’s approach to customer service. One friend sadly lost their pet over the past year. When they called to cancel their food delivery, the company not only expressed heartfelt sympathy for the loss of a family member, they went one step beyond.
The next day, a package arrived with flowers and a sympathy card. Few companies go the extra mile like Chewy.
h2 Correction from February through May 2021; a rally to a lower high in August/h2CHWY shares peaked at $120 in February 2021. The parabolic move ran out of upside steam, sending the stock to a low of $64.08 on May 13.
Source: Barchart
As the chart shows, the stock almost halved in value from mid-February through mid-May. As social distancing guidelines eased with COVID-19 vaccinations, more people went back to their local store to purchase pet supplies. Meanwhile, the stock recovered, moving to a lower high at $97.74 on Aug. 13.
CHWY’s kind attention to service likely helped retain many new customers, pushing the stock higher. However, the shares ran out of upside steam, just shy of the $100 per share level. After the company released its second-quarter earnings, the stock plunged.
h2 Q2 earnings: Disappointing, but a rare miss/h2The consensus forecast for the company’s Q3 fiscal 2021 earnings was for CHWY to lose two cents per share. A disappointing four cents per share loss sent the stock lower, to its most recent low at $71.93 on Sept. 13. Technical support now stands at the May 13 $64.08 low.
Source: Yahoo (NASDAQ:AABA) Finance
The chart shows that CHWY had consistently beaten consensus earnings estimates from Q4 2020 through Q2 2021. The miss in Q3 sent the stock substantially lower.
Nonetheless, I view the recent decline as a buying opportunity for the stock.
h2 Revenue growth, shrinking losses say buy the dip; Most analysts are bullish/h2A survey of eighteen analysts on Yahoo Finance has an average price target of $93.93 for CHWY shares, with forecasts ranging from $67.75 to $133 per share. At below $74 on Sept. 13, the stock was trading at the low end of the range and over 20% below the consensus forecast.
Wall Street companies rate CHWY shares anywhere from neutral and hold to outperform at the current price level.
Source: Yahoo Finance
The chart shows impressive revenue growth from 2018 through 2021 and a declining loss. The current trend implies CHWY will earn steady profits over the coming quarters and years.
Similarly, of 20 analysts polled by Investing.com , the majority gave it an 'Outperform' rating.
Chart: Investing.com
Among respondants the average 12-month price target was $95.73, for a 30% upside.
When it comes to investing, buying the companies you have experience with is often a profitable approach. Because of my experience with CHWY I added the company to our portfolio.
I will buy more CHWY shares on a scale-down basis during the current correction. We love our pets and we love the companies that care about their customers and their furry friends.
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