Please ensure Javascript is enabled for purposes of website accessibility

Why Chewy Stock Gained 12% in February While the Market Crashed

By Jeremy Bowman - Mar 6, 2020 at 1:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An analyst upgrade helped lift the online pet products seller last month.

What happened

Shares of Chewy (CHWY 7.36%) were demonstrating their resilience last month as the stock rose in spite of the broader sell-off on COVID-19 coronavirus concerns. The online pet products seller benefited from an analyst upgrade and its perception as a safe haven as investors sell stocks that are more at risk from the outbreak.

According to data from S&P Global Market Intelligence, Chewy shares finished February up nearly 12%. As you can see from the chart below, the stock was mostly steady while the rest of the market sank on the coronavirus scare.

CHWY Chart

CHWY data by YCharts.

So what

Chewy shares rose 4% on February 21 after the stock got upgraded by RBC Capital to outperform from market perform. Analyst Mark Mahaney left his price target at $38 but said that Chewy's profitability could hit an inflection point in 2020. He also credited the company's "strong sustainable fundamentals," including 25% annual revenue growth and expanding margins.

A dog against an orange background.

Image source: Chewy.

During the last week of February, Chewy fluctuated as investors seemed to momentarily view the stock as a sanctuary from the coronavirus-related issues affecting the broad market. As an online seller of pet food and products, Chewy seems to offer protection against coronavirus fears that have afflicted retailers and other businesses that function as gathering places. Additionally, it should be resistant to a potential recession, as pet products are among the most recession-proof industries. Americans need to feed their pets whether the economy is good or not.

Now what

Chewy stock has fallen about 5% through the first week of March on the ongoing volatility around the coronavirus as investors have bought some stocks that might have been oversold last week. Its status as a safe harbor might not be perfect, then, and like other retailers , Chewy could experience some supply chain issues. But if the virus keeps people at home and disrupts daily life, Chewy should fare better than most of the market, since its business is mostly impervious to those challenges.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chewy, Inc. Stock Quote
Chewy, Inc.
CHWY
$47.71 (7.36%) $3.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.