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Chewy Trades Lower as Analysts Consider the New Macro, Post-COVID Setup for Pet Spending

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Chewy (NYSE:CHWY)

On Wednesday, Chewy (NYSE:CHWY) lost 7.57% after the company’s Q2 earnings release revealed some kinks in consumer demand. Various analysts responded differently to the Chewy (NYSE:CHWY) report.

The sequential reduction in active customers and the 40% year-over-year increase in inventories, along with declining pet adoption rates post-COVID and consumer economic pressure, were the report’s main downsides, according to Evercore ISI. A rating of Outperform is kept despite the firm’s admission that some of the pet love spurred by the epidemic turned out to be transient and fleeting because there is still development potential available. Chewy’s (NYSE:CHWY) revenue and EBIDTA expectations were marginally lowered by Evercore, and the company lowered its price objective from $55 to $54.

On CHWY, Morgan Stanley is more circumspect. The report made the margins at the online pet store look better, but analyst Lauren Schenk and her team believe shares will remain range-bound because of worries about pricing tailwinds and the cutback in marketing spending. CHWY is rated Equal-weight by Morgan Stanley, with a $39 price objective.

The management of Chewy (NYSE:CHWY) argued that some of the momentum’s downward movement is temporary during the company’s earnings call.

According to CFO Mario Marte, “We think the present dynamic we are seeing in discretionary categories like hard goods is transient in nature and that demand will improve when consumer mood recovers and pet household growth returns to historical levels.”

Chewy Graph

On August 16, Chewy began trading in a downtrend. Since then, it has made a steady series of lower highs and lower lows, printing 10 consecutive red candlesticks.

The most recently confirmed lower high and low for the stock were both recorded on August 23 at a price of $43.33 and $41.09, respectively.

Chewy’s relative strength index (RSI) has measured at roughly 35% after ten days of continuous bear pressure. CHWY is probably going to rally during the next few days since the company becomes oversold when its RSI gets close to or crosses the 30% threshold, which can be a buy signal for technical traders.

The CHWY stock experiences a short-term upward bounce, recording a bearish head and shoulder pattern on its daily chart. CHWY has support below $36.69 and $29.06 and resistance above $44.15 and $50.

Featured Image-  Megapixl @Piter2121

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