It’s been raining cats and dogs after online pet production and services retailer Chewy Inc. (NYSE: CHWY) announced its year-end fiscal results in 2020. Chewy defied all odds to perform exceptionally well and make significant strategic and operational progress.
Key drivers of its first full year of positive adjusted EBITDA include a 47% year-over-year growth in net sales and a 43% year-to-year increase in its customer base. As the company looks forward to a future marked by relentless innovation, winning customers’ hearts and minds and transforming into a trusted online destination for pet parents, this stout tailwind may give your portfolio a friendly boost.
Read on to learn how to buy Chewy stock now, understanding that this technology company is more than just a service for dogs or cats.
How to Buy Chewy (CHWY) Stock
Whether you see Chewy as a prime opportunity to turn a quick profit from the increased spending on pets or as your ticket to meaningful shareholder returns over the long haul, take a look at a quick overview of how to buy this public offering.
- Pick a brokerage.
The first step you can take to own a chunk of Chewy involves picking a brokerage. Luckily, the proliferation of online discount brokers has provided traders with lots of options to choose from. Even so, online brokerages are not created equal — you must identify a broker that matches your investment style.
In your hunt for a brokerage, you’ll want to consider factors like the fees charged, the kind of securities and market jurisdictions it has access to, whether it has a desktop or mobile app and the availability of educational and research resources.
- Decide how many shares you want.
CHWY has shares listed on the NYSE exchange and your preferred brokerage should locate them and fill your order. The number of shares you choose to own depends on the dollar amount you want to invest and your risk tolerance. You don’t want to allocate a large chunk of your portfolio to a single stock.
The number of CHWY shares you’ll own depends on the price at which you enter a buy position. Let's say you want to allocate $800 to CHWY. If the stock currently trades at $80, you’ll own 10 shares of CHWY stock. Don’t worry about not owning an exact number of shares since brokers now let you own fractional shares of CHWY.
- Choose your order type.
Now that you know the number of shares you want to own, it’s time to place your order. Exercise caution when placing trades since order types can have different implications on your entry positions. Most brokers will offer the following order types when you trade CHWY stock:
Market Order: A market order instructs your broker that you want to buy CHWY at the current or next available price. A market order fills faster than any other order type because a broker will execute your trade as soon as a sufficient number of shares can fill your order.
Limit Order: A limit order helps you enter a position at a designated price. In this case, you can buy a security at or below a specific price, often known as the limit price. You won’t pay more for a stock than the price you’ve set as the limit. On the flip side, your buy order may never fill if the market price fails to reach the limit price.
Stop Order: A stop order lets you buy a specific quantity of a security when your specified stop price is reached. Buy-stop orders always get placed above the current market price.
Stop-Limit Order: A stop-limit order is a hybrid combination of a stop and limit order. A stop-limit order will execute at a specified price (or better), typically after a predetermined stop price is reached. This order type eliminates the price risk tied to stop orders where the execution price is never guaranteed. Even so, your stop limit order may never fill even if the specified stop price is reached.
- Execute your trade.
Now that you know what order type to apply, it’s time to hit the buy button. On average, CHWY has a volume of 16 million shares per day so you shouldn’t worry about liquidity-related problems. You’ll own shares once your order is filled.
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Chewy Stock History
Chewy Inc. began operations in 2011 as Chewy.com and later became a publicly traded company on June 18, 2019. Sitting at about $35 billion market capitalization and employing approximately 12,000 full-time employees, Chewy now operates in a large and growing industry in the U.S., made up of pet food and treats, pet supplies and pet medications, other pet-health products and pet services.
The COVID-19 crisis boosted e-commerce and the pet industry as a whole. In Chewy’s most recent fiscal 2020 results, it excelled across the board all thanks to a growth in pet spending. The company recorded $7.15 billion net sales in fiscal 2020, 47% year-over-year growth. Volumes at the backend of the company’s most recent quarter saw traffic, orders, conversion and user retention all handsomely outperform analyst expectations.
Data from the American Pet Products Association (APPA) points to a solid growth in the pet industry, with the overall pet market growing from $73 billion in 2014 to more than $95 billion in 2019. Chewy is expected to maintain strong financial results going forward as “pet humanization” increases, or as an increased spending on pets and a shift from in-store to online purchases take over the U.S. pet industry.
Chewy Restrictions for Retail Investors
Retail investors looking to add a dividend stock to their portfolio may have to look elsewhere since CHWY doesn’t pay a dividend. Chewy also doesn’t have a direct stock purchase plan for its common stock.
Pros of Buying Chewy Stock
The U.S. pet industry continues to be among the most resilient niches during economic slowdowns due to the nature of the pet/pet parent relationship. Read through some reasons why Chewy might be a solid buy:
- Shift to online shopping: The pet industry, like many others in the United States, is in the midst of a rapid shift from in-store to online purchases. Internet shopping continues to take the market share from brick-and-mortar retail, with Packaged Facts reporting a growth in internet shopping for pet product sales from 7% in 2015 to 22% in 2019. This secular trend will certainly push the company further.
- Expansion into pet healthcare: To complement its existing diet offerings, the company launched Chewy Pharmacy to widen the scope of its pet healthcare offerings and provide its customers with a one-stop shop for prescription and special diet needs.
- Great logistical network: Chewy primarily fulfills customer orders through its broad network of fulfillment centers across the United States. This has enabled the company to cost-efficiently ship to nearly 80% of the U.S. population overnight and nearly 100% in 2 days. The company also operates customer service centers 24/7.
- No seasonality: Seasonality in Chewy’s business doesn’t follow that of traditional retailers, such as the usual high concentration of revenue in the holiday quarter. The company’s net sales typically grow all year round as it continues to acquire new customers.
Cons of Buying Chewy Stock
You want to go over a few risks you’ll want to consider before investing in CHWY:
- Competition: Chewy is one of the many players in a highly competitive pet products and services industry. Competition is particularly strong within the e-commerce channel as this industry experiences a paradigm shift from in-store to online shopping.
- Business disruption: There’s still a high level of uncertainty around the duration of business disruptions due to the COVID-19 pandemic and its likely impact on consumer spending. An adverse impact on the economy could have a material adverse impact on Chewy, its financial condition, operating results and ability to capitalize on its strategies.
An Opportunity to Play the Pet Industry
Chewy’s strong financial results in fiscal 2020 largely outperformed its expectations, but that was strongly deserved. Perhaps even more encouraging is that pet parents prefer to splurge on quality pet products, pointing to a long runway for continued growth. As people continue to buy online purchases post-COVID, Chewy should continue powering robust investor portfolios, as will similar financial instruments. At the same time, you can use this service instead of relying on a pet superstore chain.
Frequently Asked Questions
Q: How can I request Chewy financial materials?
A: Visit financials and filings on Chewy’s investor relations website to obtain quarterly results, annual reports and SEC filings or contact investor relations at email@example.com via email.
Q: Does Chewy have a direct stock purchase plan for its common stock?
A: Chewy doesn’t have a direct stock purchase plan.