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Chewy Climbs as Jefferies Upgrade Cites Pet-Care Potential

Jefferies Analyst Stephanie Wissink nearly doubled her price target on Chewy, citing pet-care-industry trends.

Online-pet-products retailer Chewy  (CHWY) - Get Chewy, Inc. Class A Report should benefit from increasing pet ownership, according to a Jefferies analyst, who upgraded the company to buy from hold.

Analyst Stephanie Wissink also nearly doubled her share-price target, to $100 from $59, after taking over coverage of the company.

Shares of the Dania Beach, Fla., company at last check were 4.3% higher at $67.67.

Wissink said in an investors' note that she has a positive view of pet industry dynamics, particularly pet adoption by the digitally fluent. 

The analyst said Chewy, along with pet-food company Freshpet  (FRPT) - Get Freshpet Inc Report and pet medication company PetIQ  (PETQ) - Get PetIQ, Inc. Class A Report, should benefit from the rapid evolution of the global pet-care industry. That effort should result in U.S. sales of about $64 billion in 2024.

Chewy's "moat is widening with several levers to hedge growth moderation" of the core business, she said.

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Wissink said that pet ownership “has increased as incomes have risen globally,” with millennials and Generation Z becoming a “larger share of pet parents, as they are having children at a later age than previous generations."

The analyst noted that the pet-food category is relatively resilient during a recession. Pet owners “do not penalize pets” during economic downturns, she said.

Wissink said that more than a third of respondents to a recent survey have gotten a pet since the onset of the coronavirus pandemic. 

The outbreak has driven more online ordering of pet products, the analyst said.

Roughly 27% of respondents are buying food and supplies online, the survey found.

Last month Chewy posted better-than-expected second-quarter revenue, as stay-at-home orders caused by the pandemic boosted online sales of pet products.