Stock of Chewy experiencing significant surge this week
Chewy, the popular online pet retailer, is currently trading at 30 times forward earnings, a figure that reflects investors' confidence in the company's future prospects. This high valuation is justified by numerous qualitative factors that make Chewy an outstanding stock to consider.
Despite a temporary dip following the earnings report last Wednesday, September 10, Chewy's shares have shown resilience. The drop in share price was a result of conservative guidance offered by the company, but the stock has since bounced back, with a 11% increase this week as of 1 p.m. ET on Friday.
Chewy's commitment to customer satisfaction is a significant factor in its attractiveness. The company is known for its willingness to go above and beyond for its customers and their furry friends, a strategy that has earned it a loyal customer base. This loyalty is evident in the company's immensely loyal base of patrons, who continue to support Chewy despite market fluctuations.
The company's CEO, Sumit Singh, has been instrumental in driving Chewy's profit margins and ecosystem development. Initiatives like the Autoship subscription program and the Chewy+ membership program have contributed to the company's success. Home to the Chewy+ membership program, 12 Chewy Vet Care clinics, a heavily used autoship offering, the most pet pharmaceutical sales in the U.S., and a growing list of private label products, Chewy has become a one-stop shop for pets.
Chewy's profit margins and 10% annualized growth rate over the last three years are notable. The potential for these margins to rise is a primary reason for confidence in the company's stock. The company's growing list of private label products is another factor that adds to this confidence.
Chewy's success extends beyond its financial performance. The company ranked as the 29th top brand among millennials, according to Comparably, and it landed at the No. 1 spot on Forrester's Customer Experience Index. Chewy's commitment to customer satisfaction has clearly paid off.
It's worth noting that some analysts, including this author, argued that the sell-off seemed to be an overreaction after the earnings report. A week later, Chewy's stock has shown signs of recovery, indicating that the market may have been too quick to judge.
In conclusion, Chewy's unique business model, customer-centric approach, and strong financial performance make it an attractive investment option. Despite a temporary setback following the earnings report, Chewy's stock has demonstrated resilience and continues to perform well in the market.
