There are reasons to consider buying Chewy stock despite recent challenges. The pet-ownership rate in the US has declined slightly, which may be attributed to the rising costs of taking care of pets. However, Chewy’s low prices as an online pet supply store and its convenience make it an attractive option for consumers. Additionally, pet owners still have a strong emotional connection with their pets and are willing to spend more on them. Chewy’s ongoing growth and projected profitability also contribute to its potential as an investment. While the stock’s recent performance has been affected by factors such as the COVID-19 pandemic and short-selling, its future prospects are promising. However, it’s worth noting that the stock is currently considered expensive, and there is a potential for continued volatility.
Four reasons Chewy stock is a buy
1. Chewy is often the low-price leader
Chewy offers competitive prices compared to brick-and-mortar retail stores. Its online-only model allows it to avoid expenses related to physical stores and optimize its distribution and fulfillment framework.
2. It’s also convenient
Chewy caters to the growing online shopping trend, with a significant portion of pet supply sales yet to shift online. The convenience of Chewy’s platform positions it well for further growth.
3. Actually, people are still pet-crazy
Despite a slight decline in pet ownership, pet owners continue to show strong attachment and a willingness to invest in their pets. The total spending on pets is expected to increase this year, presenting an opportunity for Chewy.
4. The company’s ongoing growth proves reasons 1 through 3
Chewy’s revenue is projected to grow, leading to expected profitability in the coming years. The potential for future growth makes it an attractive investment.
While there are risks associated with Chewy, such as volatility and the stock’s high valuation, for risk-tolerant investors, it could be an intriguing investment option.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy.
