General Mills To Acquire Whitebridge Pet Brands For $1.45 Billion

Chewy Inc. CHWY has experienced an extraordinary six months, with its stock surging 95.5%. Once viewed as a niche player, Chewy has now firmed its position as a dominant force in the pet-focused e-commerce space, benefiting from the growing demand for convenient, subscription-based pet products. While investors celebrate the company’s success, a pressing question remains: Does Chewy have more room to run, or is a correction on the horizon?

The stock has comfortably outpaced the industry’s modest rise of 14.5%. Chewy’s unmatched scale and operational capabilities have also helped it outperform the Retail-Wholesale sector and the S&P 500 index, which posted respective gains of 14.7% and 14.4%.

CHWY Stock Past Six-Month Performance

Chewy stock closed at $32.96 during yesterday’s trading session, sitting 15.7% below its 52-week high of $39.10, reached on June 27, 2024. CHWY also recently overtook the 50-day moving average. Let’s examine the factors behind this remarkable surge and brainstorm what potential investors’ next move should be in Chewy’s evolving story.

CHWY Trades Above 50 & 200-Day Moving Averages

Decoding Tailwinds Behind CHWY’s Impressive Run

Chewy’s impressive upward trajectory can be attributed to a combination of strong financial performance, strategic investments and favorable market trends. The company’s expanding customer base, recurring revenue model and diversified service offerings, including veterinary clinics and pharmacy services, provide a solid foundation for continued growth. Chewy’s ability to improve margins, invest in technology and generate robust free cash flow adds significant investor confidence in its long-term prospects.

The company is steadily adapting to changing market dynamics while prioritizing customer loyalty making it a strong contender in the burgeoning pet care market.

A prime example of Chewy's focus on enhancing the customer experience is its innovative Autoship program, which saw a 5.8% year-over-year increase in sales during the second quarter of fiscal 2024, contributing a significant 78.4% of total net sales. This feature not only simplifies the purchasing process but also helps the company maintain a steady revenue stream, enabling it to tailor offerings based on preferences and needs.

Chewy's strategic expansion into veterinary care has shown promising results. The company opened two additional Chewy Vet Care clinics, bringing the total to six locations at the end of the second quarter. These clinics not only enhance customer loyalty but also act as strategic entry points for new customers, embedding them into the Chewy ecosystem. This initiative has a positive impact on Net Sales Per Active Customer (“NSPAC”), which reached a new record of $565 in the second quarter, reflecting year-over-year growth of 6.2%.

Chewy's Sponsored Ads business is ramping up nicely and is on track to reach the low end of its long-term target of 1% to 3% of net sales by the end of 2024. The growth in this area is driven by an expanding inventory, increased advertiser demand and improved customer engagement metrics. This revenue stream not only diversifies Chewy's income but also capitalizes on its large customer base.

Chewy has invested in improving its mobile app experience, resulting in a 13% year-over-year increase in unique customers placing orders through the app and a 15% rise in overall mobile app orders. The app’s redesign has enhanced user experience, leading to higher order volumes and improved customer retention.

What Could Hinder Chewy Stock's Momentum?

While Chewy continues to lead the pet e-commerce space, several factors could exert downward pressure on the stock. Slowing growth, potential customer acquisition saturation and rising cost pressures are critical areas that investors should monitor.

Chewy’s active customer count showed a modest sequential increase during the second quarter. Management highlighted that they expect the number of active customers to remain flat for 2024.

Chewy also operates in a highly price-sensitive market, where competitors quickly adjust their pricing strategies to attract customers. In addition, persistent inflationary pressures, especially in logistics, labor, and raw materials, could squeeze margins. The company’s advertising and marketing expenses, consuming 6% to 7% of net sales, may further strain profitability if revenue growth does not pick up.

Moreover, Chewy’s forward 12-month price-to-earnings ratio stands at 27.18, higher than the industry’s average of 25.36 and the S&P 500's 22.7. This premium valuation suggests that investors may be overpaying relative to the company’s expected earnings growth, and with a Value Score of C, Chewy may be overvalued. As a result, there could be a price correction on the horizon.

CHWY Stock Looks Overvalued

Is CHWY Stock Still a Buy?

Chewy's impressive growth momentum reflects its strategic approach to capturing the expanding pet care market. Key initiatives such as the Autoship program, veterinary clinic expansion and an enhanced mobile app experience have strengthened customer loyalty, boosted recurring revenues and supported a rise in NSPAC.

However, as Chewy continues to innovate, challenges loom, including high operational costs and stiff competition from Petco Health and Wellness Company, Inc. WOOF, Central Garden & Pet Company CENT and BARK, Inc. BARK. Additionally, its premium valuation indicates that some growth expectations may already be factored in, potentially limiting near-term stock appreciation. Current stakeholders should consider whether the stock’s current price aligns with their investment timeline and risk tolerance, while new investors should wait for a more favorable entry point. CHWY currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

The Coca-Cola Company KO stock has rolled down 9.8% in the past month, underperforming the broader industry’s 6.3% decline. With this decline, KO shares have underperformed the broader Consumer Staples sector’s dip of 3.8% and the S&P 500’s rally of 2.7% in the same period.

Coca-Cola's stock performance also shows a notable decline from its close competitors, including PepsiCo Inc. PEP and Keurig Dr Pepper KDP, which have lost 6.7% and 9.4%, respectively, in the past month. It also reflects a significant underperformance against Monster Beverage’s MNST rally of 7.9% in the same period.

KO’s One-Month Stock Performance

RumbleON, Inc. (RMBL) came out with a quarterly loss of $0.32 per share versus the Zacks Consensus Estimate of a loss of $0.11. This compares to loss of $0.71 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -190.91%. A quarter ago, it was expected that this company would post earnings of $0.02 per share when it actually produced break-even earnings, delivering a surprise of -100%.

Over the last four quarters, the company has not been able to surpass consensus EPS estimates.

RumbleON, which belongs to the Zacks Internet - Commerce industry, posted revenues of $295 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 2.56%. This compares to year-ago revenues of $338.11 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

RumbleON shares have lost about 30.2% since the beginning of the year versus the S&P 500's gain of 25.8%.

What's Next for RumbleON?

While RumbleON has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for RumbleON: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.13 on $291.38 million in revenues for the coming quarter and -$0.55 on $1.24 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Commerce is currently in the top 27% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, Chewy (CHWY), is yet to report results for the quarter ended October 2024.

This online pet store is expected to post quarterly earnings of $0.23 per share in its upcoming report, which represents a year-over-year change of +53.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Chewy's revenues are expected to be $2.86 billion, up 4.5% from the year-ago quarter.

Zacks Investment Research

Meme cryptocurrency Dogecoin is soaring in price and valuation, up more than 80% in the past week and setting new 52-week highs.

With the latest push in valuation, Dogecoin passed the valuation of some well-known global companies.

What Happened: Dogecoin was created in 2013 by Jackson Palmer and Billy Markus, meant as a joke and as a satirical coin to mock Bitcoin .

While Dogecoin trails Bitcoin in value at $47.7 billion to $1.72 trillion based on current market capitalizations, the accomplishments of increasing that much in value are no laughing matter.

With its current market capitalization of $47.7 billion at the time of writing, Dogecoin would rank as the 428th largest company in the world, according to companiesmarketcap.com.

Here is a look at some well-known companies that are worth less than Dogecoin is Monday:

• Occidental Petroleum : $47.6 billion
• Volkwagen : $46.3 billion
• Nasdaq : $45.7 billion
• Keurig Dr Pepper : $44.9 billion
• Ford Motor Company : $44.7 billion
• Heineken : $44.1 billion
• Kroger : $43.2 billion
• Adidas : $42.5 billion
• Honda Motor Company : $42.5 billion
• Delta Air Lines : $40.9 billion
• Kraft Heinz Company : $39.4 billion
• Lululemon Athletica : $39.1 billion
• Yum! Brands : $38.2 billion
• 7-Eleven: $37.3 billion
• Roblox Corporation : $35.7 billion

There you have it, 15 companies you've likely heard of now worth less than Dogecoin. Years ago, it was likely unimaginable that the joke cryptocurrency would become larger than companies like Ford and Adidas, but here we are.

Read Also: Here’s How Much $100 In Dogecoin Today Could Be Worth If DOGE Hits New All-Time Highs

What's Next: The cryptocurrency sector has been enjoying a surge in valuation and interest since the 2024 election with Dogecoin far from the only cryptocurrency trading higher.

Bitcoin hit several new all-time highs on Monday and is currently trading over $87,000.

Dogecoin hit a one-year high of $0.3278 on Monday and currently trades at $0.3251. While the cryptocurrency is up over 100% in the last seven days, Dogecoin trades below its all-time high which was previously set back in May 2021.

Dogecoin's current all-time high stands at $0.7376, a level reached on the same day Elon Musk appeared on an episode of "Saturday Night Live" and gave the meme crypto several shout-outs.

Musk's call to be in charge of the Department of Government Efficiency, or D.O.G.E. under President-elect Donald Trump has increased attention on Dogecoin.

Read Next:

• If You Invested $100 In Dogecoin When Elon Musk First Tweeted About The Meme Crypto, Here’s How Much You’d Have Today

Photo: Executium via Unsplash

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