The Ratings Game: Chewy’s ‘defensive’ business could shine as pets need food in any economic climate, says analyst

by | Jun 27, 2022 | Stock Market

In good and bad economic times, people need to buy pet food, and that’s one reason Chewy Inc.’s stock may be worth a new look. Needham analyst Anna Andreeva upgraded Chewy shares
to buy from hold Monday, writing that the stock looks like a way to play defense in the current market.

“The pet space is defensive (historically outperforms during recessions) and demand is inelastic (cost increases are passed through to consumers, especially in the staple-like Consumables category),” she wrote in a note to clients. Chewy’s stock was up 0.2% in afternoon trading Monday. Chewy has other factors working in its favor as well, in Andreeva’s view. After having missed consensus expectations on earnings before interest, taxes, depreciation, and amortization (Ebitda) for four straight quarters, Chewy snapped the streak with a beat in the first quarter, and Andreeva thinks the company has been able to maintain that new momentum. Not only are pet items “inelastic,” but she also sees signs of improving supply-chain trends, as well as success with Chewy’s own initiatives, such as automated fulfillment centers, meant to enhance profitability. See more: Chewy posts surprise profit While Chewy could hold up in the current economic climate, fellow e-commerce company Etsy Inc.

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