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Why Chewy Jumped 26% in November

By Andrew Tseng - Dec 7, 2020 at 11:10PM

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Two new business lines are expanding the company's long-term potential.

Shares of Chewy ( CHWY 2.07% ) jumped 25.9% in November, according to data from S&P Global Market Intelligence. That move sent the stock of the online retailer of pet food and supplies from $62 per share to $78 during the month.

For context, Chewy shares began the year at $29 and have soared 167.5% for the year through November.

What happened

During November, Chewy announced it expanded its pet pharmacy business by launching compounded medications for pets. This provides pet owners with "the ability to order customized, pharmaceutical grade, prescription medications that meet their pets' unique needs, that cannot be fulfilled by commercially available alternatives."

This comes on the heels of the company's late October announcement that it is launching a telehealth service for pets and has plans to launch it nationwide. 

A dog eats food out of a dog bowl.

Image source: Getty Images.

So what

Both of these new business lines are meant to expand Chewy's addressable market. The company has traditionally competed in the U.S. pet food and supplies business. That's the majority of a $58.2 billion market in the U.S., according to an estimate from the American Pet Products Association.

That's a substantial market size, but adding adjacent markets like telehealth and compounding medications only broadens and expands the company's long-term potential. 

Now what

Chewy remains a rapidly growing business, having grown its net sales by 47% last quarter. The COVID-19 pandemic has pushed more retail activity online and Chewy has certainly been a beneficiary.

Given Chewy's entry into telehealth, compounding medications, and likely additional services over time, investors should think of Chewy as not just an online retailer in the pet category. 

Chewy announces its third-quarter results after the market closes on Tuesday.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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