Pet ownership has seen incredible growth in the past year and a half. This was brought on by the pandemic buying craze, as people felt increasingly isolated by the virus lockdowns. However…
recently stocks in the pet industry have seen a pull back, as evident by the 2.5% drop in the ProShares Pet Care ETF (PAWZ) during the last month. One of the pet stocks that has been hardest hit is Chewy Inc. (CHWY), which has dropped more than 7.5% since it reported earnings on September 2nd.
Chewy, Inc. is an online seller of branded and private-label pet food and grooming supplies. CHWY’s bands include A Pet Hub, A&E Cage Company, ABO Gear, Acurel, Addiction, Advance, Advantage, Apocaps, Atopia, Audubon Park and Ark Naturals. CHWY offers over 1,600 brands with its operations in 13 locations, its Website, and mobile applications.
Today I’ll take a look at CHWY to determine whether this dip constitutes a buying opportunity.
Since the beginning of the year, the stock price of CHWY has fallen 18%, massively underperforming the S&P 500 which is up 18.8%.
While CHWY net sales surged in recent months, its profitability remains restrained
CHWY has benefited significantly from the pandemic, as more and more customers purchased pet food and other products during the lockdowns. The company’s fundamentals were enhanced by this trend, with CHWY’s top-line growth expected to jump 47.4% to $7.14b in 2021. Nevertheless, analyst expectations for net sales remain high for the following years, with net sales expected to advance by 25% to $8.95b in 2022 and by 20.6% to $10.8b in 2023.
In spite of the high growth, the company’s bottom line has worsened in 2021 and is expected to report a net loss of $925m in 2021, compared to a loss of only $252m in 2020. Going forward, CHWY should turn things around in 2022 and the company should deliver a net profit of $407m, corresponding to a net margin of only 0.45%.
On the bright side, the company has…
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