Chewy
stock was climbing Tuesday after an analyst said the importance people put on their pets should provide a tailwind for the company moving forward.
Chewy
(ticker: CHWY) is an online retailer for pet supplies including food, toys, and medicine. JMP analyst Nicholas Jones initiated coverage of the company with a Market Outperform rating on Tuesday, which happened to be National Pet Day. Jones wrote in a research note that his bullishness is due to people’s love of their pets.
“Chewy, Inc.’s dominant position within pet-related retail and services positions it well to capture a highly impassioned audience that is increasingly humanizing their pets. This behavior should continue to increase the premiumization of pets, driving consumers to allocate more discretionary spend to those pets longer term,” Jones wrote in a research note.
Chewy stock soared during the Covid-19 pandemic as people relied on the online pet retailer while they were prevented from shopping in physical stores. And users can set up a service that automatically ships items to their home at a discounted price, called autoship.
But now pandemic lockdowns have ended and people are returning to bricks-and-mortar shops, the stock has fallen about 60% from its record high in 2020. Jones gave the stock a $50 price target, which implies a 38% increase from its current price.
“Overall, Chewy is well positioned to benefit from an increasing share of pet-related spend shifting online,” Jones noted. “Further, its specialized focus within the category should enable it to cater to customers in ways broad-based retailers cannot, and we believe its autoship solution can likely win share from bricks-and-mortar incumbents as consumers opt for convenience.”
Shares of Chewy were up 2.3% Tuesday to $36.07. The stock has fallen 2.1% this year.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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