Why Chewy Stock Hit a Rough Patch

Chewy (NYSE: CHWY) experienced a notable decline in its stock price, falling by 6% on Thursday. This drop followed a day after investors reacted to the company's third-quarter earnings report, which had mixed results. Although there wasn't any specific news directly from Chewy, the downgrade of its stock recommendation by an analyst contributed to the stock's fall.

Analyst Downgrade

Before the market opened on Thursday, Chris Bottiglieri from Exane BNP Paribas downgraded Chewy’s recommendation. His new stance is neutral, compared to the previous outperform (or buy) rating he had assigned. Currently, he has set a price target of $30 per share for Chewy's stock.

The reasons behind Bottiglieri's downgrade are not completely clear. However, it seems closely connected to the recent earnings announcement. Although Chewy reported revenue growth and even achieved a profit, the net income reported was below what analysts had expected.

It's worth mentioning that while no analysts upgraded their ratings for Chewy on Thursday, some did raise their price targets. Analysts from TD Cowen, Guggenheim, and Goldman Sachs adjusted their targets upward, though the increases were minimal.

Looking Forward

Today's market environment often leads investors to expect strong growth from retail stocks. In this case, Chewy's revenue increase of 5% year-over-year was not enough to satisfy market expectations. Investors generally desire more substantial growth figures, especially in the current retail landscape. However, it's important to consider that management is optimistic, projecting a much healthier growth figure of 13% for the current quarter.

Disclaimer: The author has no position in the stocks mentioned. The author does not have an affiliation with any of the referenced companies.

Chewy, Stock, Earnings