Can Chewy stock stage a bounce soon?
The shares of Chewy Inc (NYSE:CHWY) are feeling the weight of a Piper Sandler downgrade today. The analyst lowered its rating to "neutral" from "overweight," and cut its price target to $55 from $70. Piper Sandler noted that 2022 will likely be full of headwinds for Chewy's sales and margins, adding that it sees gross customer adds to fall below their 2021 numbers.
The stock is eyeing its lowest close since August 2020, as it toes recent support at the $50 level. It was last seen down 3.9% at $50.78, and has dropped roughly 48% in the past 12 months. Looking closer, the equity did attempt a rebound in late December, but was promptly rejected by the 30-day moving average.
The recent breakdown in shares has short sellers coming out of the woodwork. Short interest rose 32.2% in the last reporting period, and now the 21.48 million shares sold short make up over a quarter of the stock's available float, or more than a week's worth of pent-up buying power at its average daily pace of trading.
From a fundamental point of view, however, Chewy stock is beginning to reach an attractive valuation once again after CHWY’s bearish run over the past year. Though its earnings report is now in the rearview, the stock now trades at a price-sales ratio of 2.68, which is a great value considering its high-paced revenue growth.
The pet supply company has increased its revenues 76% since fiscal 2020 and has delivered 306% revenue growth since fiscal 2018. In addition, CHWY is expected grow revenues another 18.9% in 2022, making the stock a very intriguing growth play. Moreover, the firm holds a strong balance sheet with $726.92 million in cash and $401.14 million in total debt, setting CHWY up nicely for the coming years.