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Chewy Stock Plunges: Analyzing the 6% Drop on Thursday

Eli GrantThursday, Dec 5, 2024 6:33 pm ET
1min read


Chewy (CHWY), the popular online pet retailer, experienced a significant drop in its stock price on Thursday, falling by 6%. This decline can be attributed to a combination of factors, including a mixed earnings report, an analyst downgrade, and broader industry trends.

Chewy reported its third-quarter earnings on Wednesday, with revenue growth of 5% year-over-year. While the company managed to flip to a bottom-line profit, its net income figure missed analyst estimates. This discrepancy likely contributed to the stock's decline, as investors were hoping for more robust growth figures.

Adding to the downward pressure, Exane BNP Paribas' analyst Chris Bottiglieri downgraded Chewy's recommendation from outperform to neutral. This change in sentiment signaled a less bullish outlook on the company's prospects and may have spooked investors, leading to the 6% drop in the stock.

However, it is essential to consider other factors that may have influenced Chewy's stock performance. The pet care industry is expected to grow by 4.7% in 2024, reaching €191.2 billion, according to Euromonitor International. This growth is driven by the increasing humanization of pets and a deeper focus on pet health. Despite the slowdown from the previous year (6% in 2023), the industry remains a promising investment opportunity.



Chewy's revenue growth of 5% may have left investors wanting more, particularly given the industry's expected growth rate. However, it is worth noting that the company forecasts a more robust 13% growth for the current quarter. This optimism suggests that Chewy remains well-positioned to capitalize on the growing demand for pet care products.

Moreover, the global pet food segment is projected to increase at a higher pace than the overall industry, with the market representing €140.2 billion by the end of 2024, a 5.3% increase. The pet products category is also forecasted to increase its market share by 3% this year, reaching €50.9 billion worldwide. These growth projections indicate that the industry's fundamentals remain strong, despite the recent stock market fluctuations.

In conclusion, Chewy's stock decline on Thursday was likely driven by a mix of factors, including a slight underwhelming earnings report and an analyst downgrade. However, the broader pet care industry's growth projections suggest that the company remains well-positioned to capitalize on the growing demand for pet care products. As the industry continues to grow and evolve, investors should monitor Chewy's performance and adapt their strategies accordingly.
Comments

Post
NeighborhoodOld7075
12/06
$CHWY got it wrong. WOOF spiked post-earnings and now has a 27% short interest. Expect a significant squeeze.
0
PlatHobbits7
12/05
Pet care industry's growth is a goldmine
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Phuffu
12/05
Analyst downgrade hit hard. Neutral vibes aren't what I want for my portfolio. Watching closely for a bounce back.
0
Ubarjarl
12/05
Holding $CHWY long-term, growth potential still looks solid
0
OhShit__ItsDrTran
12/05
Chewy's 5% revenue growth feels meh, but that 13% forecasted growth for Q4 got me hyped. 🚀
0
EightBitMemory
12/05
6% drop feels rough, but patience pays dividends
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freekittykitty
12/05
Pet care industry still growing, but Chewy's numbers are meh. Holding my $CHWY, but might pivot if growth doesn't pick up.
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dritu_
12/05
$CHWY's forecasted 13% growth is promising, stay bullish
0
HJForsythe
12/05
Pet food segment booming, but Chewy's revenue is sluggish. 🤔 Maybe it's time for a new pet stock play.
0
PikaZoz123
12/05
Analyst downgrade hit my portfolio hard today 😬
0
Senyorty12
12/05
Chewy's 5% growth looks weak next to the 6% drop. Time to rethink my pet store diversification strategy.
0
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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