Why I’m Investing Heavily in Chewy $CHWY
I attended a small private University where I obtained my Bachelor’s Degree. There were 3 things the residence directors outlawed: Weed, Booze, and Pets… Pot stinks up the dorm, Alcohol creates noise, Pets (dogs and cats) do both, plus shit and piss. Although, no rules were going to stop college students from these essential commodities. Am I right? or am I right?
My point being — there's an actual pet boom happening at the moment. Referring back to the college experience. I knew kids who were literally seeing psychologists just so they could overrule the school's pet rule via disability. Yes, that's right people will go to a shirk not for their problems but for a puppy.
The COVID-19 pandemic has caused a pet buying frenzy. Veterinarians were booked like never before and experiencing an unforeseen increase in demand. When does such a thing ever happen?
Wife: “Honey I’m feeling kind of depressed from being inside all day. I can’t go anywhere because this virus”
Husband: “Wanna buy a puppy?”
Great, so you made your wife happy!! We all know how these fluff balls can bring a smile to our faces on any given day. Although, the true reality is a puppy barking, training, teething.
Do you really want to leave your residence during a global pandemic? No, probably not although, you could because Petco, Petsmart, Walmart, etc. Were all deemed essential retailers during the lockdown of the United States economy. Why risk potentially contracting COVID-19 when you have a supercomputer in the palm of your hands.
Chewy (CHWY) solves this presumably short-term problem. The website is amazing check it out: www.chewy.com they have every essential good and product for a variety of animals. Dogs, cats, reptiles, fish, birds, small animals, farm animals, and horses.
I have three cats myself and Chewy makes life very easy. FedEx (FDX) drops litter, food, prescriptions, and toys all at my doorstep.
Now about the stock. Chewy’s IPO was in June 2019 the price action fluctuated between the $20-$30 range until its first major breakout in late March 2020. Now I don’t know about you but March 2020 has been engraved in my mind as the greatest buying opportunity in my investing journey.
The stock absolutely ripped to all-time highs of $120 per share. Though early investors were soon humbled by the massive gains as the stock recently sold off to ~$65 per share. A level where I’m currently accumulating this soon-to-be pet mecca e-commerce retailer.
Now to clarify this is not investment advice. The stock market has recently cooled down after being super hot, especially the NASDAQ tech stocks. There is a chance this could very likely see more bloody days ahead. Although, I personally will continue to accumulate shares of Chewy. Let’s break down some fundamentals below.
Fundamentals
Chewy has seen extreme growth due to the COVID-19 pandemic as of Q4 2020, Chewy reported they have 19 million Active Customers (+42.7% YoY). 2020 Fiscal Year Net Sales of $7.15 billion (+47.4% YoY). Net Sales Per Active Customer $372 (+3.3% YoY).
The company is still in the early stages, so profits are nonexistent. Although, 2020 Fiscal Year Net Loss ($92.5M) is a huge decrease from the year before (+159.9M YoY)
Technicals
Price actions recently seem to have found new support around the $65 level. $77 is the current resistance level, CHWY needs to break in order for another run. The stock is currently trading under the 200 EMA.
Again this stock got very hot. Although, I believe this pet boom across the nation will retain the 42.7% increase in Active Customers. Growth is the key to the future of this company. Marketing is strong and it seems like every time you drive down the street or take out the trash you see another Chewy box!
I hope you all enjoyed my thoughts on Chewy. I look to continue writing about the investments I’m interested in. Not just stocks. Maybe crypto, sports cards, or even retail arbitrage. If you would like to keep up with my quick thoughts please follow my Twitter @titusson44
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Again this is not investment advice. I strongly recommend proper due diligence!