Where Will Chewy.com Be in 5 Years?

Among the breakout stocks during the COVID-19 pandemic, Chewy.com (NYSE: CHWY) has been a unique case.

Shares of the online pet products seller are up 35% year-to-date, compared with a 9% loss for the S&P 500, and it's clear why the stock has been flying higher. Chewy is benefiting from two trends that have emerged during the pandemic: First, pet adoptions have surged as Americans sheltering in place have looked for comfort from their furry friends, and a number of animal shelters have reported shortages of pets to adopt in recent weeks. Second, e-commerce has surged during the crisis, with non-essential stores shut down and Americans fearful of venturing into stores while the virus is circulating.

In its latest earnings report, which came out on April 2, management said that sales had begun to accelerate at the end of February, and that trend had persisted through the report date. For the first quarter, which started in early February, the company expects revenue to increase 35%-37%, up slightly from the 35% pace it registered in the fourth quarter. The company warned on the earnings call that margins could be affected by the surge in demand as fulfillment may be less efficient, and it said that demand could moderate when the pandemic fades as customers work through their stockpiles. However, the company has also seen a meaningful lift in new customers, giving it a long-term revenue stream that will boost growth.

Source Fool.com