If you're looking for an underdog to root for this earnings season, consider a company that knows a thing or two about dogs. And cats. And other household pets.

Chewy (CHWY -3.45%) reports its fiscal second-quarter results on Wednesday afternoon. The stock chart doesn't look very appetizing. The online retailer of pet supplies hit a fresh 52-week low at the end of last week. It's just 3% from that valley, and would have to more than double to revisit its 52-week high. Chewy stock is trading 78% lower than its all-time peak it hit in early 2021.

This isn't a problem. It's an opportunity. 

Every dog stock has its day

In a year of rising equity prices, Chewy is trading 30% lower in 2023. The irony here is that Chewy shares moved nicely higher the last time it posted fresh financials. It served up a 15% increase in net sales for its fiscal first quarter, its healthiest year-over-year increase in more than a year. 

Chewy's performance was even better on the bottom line. It surprised investors with a profit, but it's not really a surprise for anyone who's actually paying attention. It has delivered positive earnings for five consecutive quarters, but analysts were targeting a small loss every single time. Guess what Wall Street pros think will happen this time?

Two dogs wearing sunglasses, surrounded by chew toys on a lawn.

Image source: Getty Images.

Analysts are modeling a loss of $0.05 a share. Chewy could pour out a bowl of red ink after the market close on Wednesday, but recent history suggests otherwise. The market also sees net sales climbing 14% to reach $2.76 billion, but it also landed comfortably ahead of Wall Street expectations last time. 

Chewy stock would go on to soar 22% on June 1, the day after it posted its blowout fiscal first-quarter numbers. It has given back all of those gains, and then some. I told you this was an underdog. 

This is a company that's at the intersection of plenty of favorable trends. Folks took in a lot of new dogs and cats three years ago when the pandemic hit home and figured they'd be sheltering in place for a spell. Those puppies and kittens are bigger now, and that means more food and other treats and pet-care essentials. This should be a dinner bell for pet food stocks. The humanization of pets trend is also quite real, and that means more of us are spoiling our pets. Chewy is perfect for this climate. It even expanded its pet insurance and wellness offerings this summer.

The stock has taken a hit over the last three months, even as the general market has inched higher. Chewy hasn't hosed down its earlier guidance. Its CFO did retire from the company last month, but that alone isn't a red flag. Key executives aren't bolted to their corner offices. 

An important catalyst for the stock hitting a new 52-week low late last week was Wedbush analyst Seth Basham slashing his price target on Chewy from $45 to $31. However, he kept his bullish outperform rating on the stock. He also wrote at the time that he saw modest downside risk to Wednesday's financial update. He feels that decent results are already factored into market expectations, but the stock chart tells an entirely different story. 

Chewy isn't perfect. Yes, it's profitable, but customer base growth has been stagnant for the last two years. However, with its first international push -- starting in Canada -- this is a company that could be early in its global growth story. The ceiling of this doghouse seems higher than the floor at this point.