Stock Rises On Chewy's 'Dominant Position' With Animal Lovers

An analyst at Morgan Stanley said that Chewy CHWY +0.41% should enjoy a tailwind moving forward as people are placing greater value on their pets than they did five years ago.

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The Chewy Company (ticker symbol CHWY) is a company that sells pet supplies on its website, including food, toys, and medication. Nicholas Jones, a JMP analyst, initiated coverage of the company on Tuesday with a Market Outperform rating, which coincided with National Pet Day, which was held on Tuesday this week. It was Jones' belief that people's love of their pets was the reason for his bullishness in a research note he published.

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"Chewy, Inc. is well positioned to capture a highly emotional audience who is becoming increasingly humanizing their pets because of its dominant position within pet-related retail and services." According to Jones in a research note, this behavior will likely drive consumers to allocate more discretionary spending on pets over the long term, increasing the premiumization of pets.

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While people were unable to shop in physical stores because of the Covid-19 pandemic, Chewy stock soared due to the fact that people relied on online pet retailers during that time. Lastly, there is the option to set up automated shipping at a discounted price via an auto-ship service that can automatically ship items to a user's home.

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As a result of the pandemic lockdowns coming to an end, and people returning to brick-and-mortar establishments, the stock price has fallen by more than 60% from its record high that was set in 2020. It was stated by Jones that the stock is expected to reach a $50 price level, implying that its current price has decreased by 38%.

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According to Jones, Chewy has a good chance of attracting a growing share of pet-related spending online as more pet-related spending shifts online. As well as its focus within the category, we believe that its auto-ship solution is likely to win a share from brick-and-mortar incumbents as consumers prefer convenience over brick-and-mortar. Additionally, as a result of its specialized focus within the category, we believe it is better positioned to satisfy customers in ways broad-based retailers cannot.

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During the day Tuesday, Chewy's shares rose 2.3% to $36.07. Its shares have fallen 2.1% over the past year.

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