Chewy’s shares continue to trade above its IPO price of $22.
Online pet retailer Chewy made an impressive debut during its initial public offering on June 14. The company’s shares rose 88% from its offering price of $22 per share and ended the day at $34.99.
The stock has fallen since then, though Chewy’s shares continue to trade for about their IPO price. On Tuesday, JP Morgan Chase initiated the stock as overweight.
Here’s what Chewy’s doing well, and why it’s a great sign for the pet industry…
Demand for the Pet Industry is Growing
Chewy was founded in 2011 and later acquired by PetSmart. E-commerce stocks have performed well in recent years and Chewy’s success demonstrates the growing demand for online pet retailers.
And the pet industry as a whole has proven to be a lucrative industry. It’s not a seasonal industry — it’s easier for companies like Chewy to plan how to allocate their resources for maximum effectiveness.
It’s no secret that people love their pets and are willing to spend quite a bit of money on them, even during times that are tight financially. According to Chewy, the company’s customers become more valuable the longer they stay with the company.
One of the things Chewy has done well is offer subscription plans, which account for two-thirds of its sales. This has helped the company develop strong brand loyalty from its 10 million customers.
Chewy is not yet profitable, but in 2018, the company did earn $3.53 billion in revenue. This is up 68% year over year. The majority of the company’s revenue came from sales of pet food, supplies and medicine, and veterinary services.
What’s the Scoop on Chewy Investing?
One thing that may be holding some investors back is the history of online pet retailers who went bankrupt during the late 90s, like Pets.com. The company attracted big-name investors before going public in 2000, raising $82 million. But just nine months later, the company went out of business.
However, running an e-commerce store during the late 90s was much more difficult than it is today. At that point, many consumers would just as soon run to their local pet store to buy pet food. The same can’t be said today.
Chewy’s fundamentals are strong and consumer demand for pet products only continues to increase. Last year, Americans spent three times as much money on their pets as they did two decades ago. For that reason, Chewy could be a good stock for investors to watch.
