PreMarket Prep Stock Of The Day: Are Traders Biting Off More Than They Can Chew?

Zinger Key Points
  • After a much higher open, Chewy immediately peaked a few pennies higher and reversed course.
  • The brief decline found support just ahead of the top of Wednesday’s range.

Trading an issue on the day of its earnings report can be difficult. Monitoring the after-hours or premarket action along with being cognizant of the trading range from the last few sessions can be helpful. A good example of this is the price action in Chewy Inc. CHWY, which is the PreMarket Prep Stock of the Day.

Chewy's 2-Day Trading Range: The Street was leaning short into the report, as the issue has been in an extended downtrend. In Tuesday’s session, the issue had a range of $24.76 to $27.92 and finished in the red by $2.31, or 8.5%, at $24.80. On Wednesday, it had a range from $22.96 to $25.51 and finished in red by $1.31, or 5.3%, to close at $23.49.

That was the second-lowest close for the issue since March 2020, with the lowest close for the move coming on May 24 at $23.31.

Chewy's Q1 Beat: After the close on Wednesday, the company reported a first-quarter EPS beat by making 4 cents per share as opposed to the estimate of a loss of 13 cents per share. Also, the company reported quarterly sales of $2.43 billion, which beat the analyst consensus estimate of $2.42 billion.

Following the better-than-expected report after the close on Wednesday, the issue blasted to $30.26 and retreated to end the session at $27.90.

PreMarket Prep's Take: From a long-term perspective, co-host Dennis Dick posed the question: “Do they make money or have a path to profitability? GARP, growth at a reasonable price, is what I want from a company and I am not sure they are there yet.”

The author of this article noted the premarket high as a lofty target but was more focused on the pair of highs at the $28.50 area from mid-May. Also, if looking for support on a retreat, the top of Wednesday’s range ($25.51) would be the first area of support.

CHWY Price Action: After a much higher open ($27.09 vs. $23.50), Chewy immediately peaked a few pennies higher and reversed course. The brief decline found support just ahead of the top of Wednesday’s range ($25.51), only reaching $25.80, and began to rebound.

The stock ultimately gained 24.17% in Thursday's session, closing at $29.18. 

The discussion on the issue from Thursday’s show can be found here.

Posted In: PreMarket PrepEarningsNewsTechnicalsMoversTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.