WOOF - Chewy: Downgrading To Sell As Growth Prospects Are Fully Priced In
2024-07-01 13:12:18 ET
Summary
- Chewy, Inc. stock has surged close to 77% over the last two weeks due to meme trade sentiment, although it has shed close to 30% from its peak to $27.24.
- The company reported its Q1 FY24 earnings where revenue and earnings grew 3% driven by successful acquisition, reactivation and deepening adoption of Autoship & Chewy Health.
- While the company is expanding its strategic initiatives with Chewy Plus, Chewy Vet Care clinics and international expansion, it did not raise its FY24 revenue guidance.
- While the management indicated early signs of positive customer trends, the recent volatility spikes from meme trading has fully priced in growth prospects, making it a “sell.”.
Introduction & investment thesis
Chewy, Inc. (CHWY) is a pet-ecommerce business that has recently seen tremendous volatility in its stock price after Roaring Kitty posted a picture of a dog on social media site X. I had last written about Chewy on April 26, where I had rated the stock a “hold.” My thesis was predicated on my belief that the stock did not have sufficient upside as the management had warned that the company was going to see a slowdown in its revenue growth in FY24, driven by macroeconomic and pricing pressures. Since then, the stock has climbed 72% outperforming the index, though most of it is driven by meme trade sentiment rather than fundamental factors....
Chewy: Downgrading To Sell As Growth Prospects Are Fully Priced In