What happened
Shares of pet e-commerce company Chewy (CHWY -3.05%) were down 17% in April, according to data provided by S&P Global Market Intelligence. From the perspective of the company's business fundamentals, it was a quiet month. But there was some analyst commentary that could have negatively impacted the stock's performance.
So what
Chewy announced a new TV ad campaign on April 11. But I doubt this materially impacted the performance of Chewy stock last month. In the company's annual report, it says, "We invest free cash flow in marketing to attract new customers." Therefore, this expense is customary.
With its ad campaign, Chewy says it's trying to attract new customers -- something that the company is currently struggling to do. For perspective, Chewy ended 2021 with 20.7 million active customers. However, it ended 2022 with just 20.4 million active customers.
Customer acquisition trends were likely on analysts' minds when they talked about Chewy stock during April. For example, on April 20, Guggenheim analyst Steven Forbes lowered his price target for Chewy stock from $50 per share to $45 per share, according to The Fly. Forbes cited lower market-share expectations, which is a topic related to customers.
Comments from Argus analyst Kristina Ruggeri relate to comments from Forbes. On April 19, Ruggeri recommended holding Chewy stock -- not buying it -- citing increased expenses, among other things, also according to The Fly.
Comments like these from the analyst community likely didn't drum up much enthusiasm for Chewy stock. And in my opinion, it could have contributed to the drop during April.
Now what
It's important to acknowledge Chewy's customer situation. Management does believe it will return to customer growth in 2023, as well as growth in spending per active customer. Both of these factors would be enormously helpful from a profitability perspective because they would likely make the company's U.S. operations (with high fixed costs) more efficient.
However, Chewy will also be looking outside the U.S. for new customers soon. In its most recent letter to shareholders, management said it's the right time to expand internationally. But as alluded to by Ruggeri, international expansion will likely be expensive for the company -- it operated for a long time in the U.S. before turning a profit.
That doesn't mean Chewy is necessarily a stock to avoid. In fact, I believe it's an e-commerce stock that can be bought with the next decade in mind. However, it does mean that shareholders may need to temper expectations while it's spending to acquire new customers and scale its business.