Chewy, the online pet food retailer co-founded by Ryan Cohen, has seen a 28% increase in its stock price following a successful first quarter and the announcement of a share buyback policy. With shares trading at $21.65 at the time of writing, the company’s positive earnings report has contributed to the rise in its stock value, despite a broader market decline fueled by hawkish comments on interest rate cuts.
In the first quarter, Chewy reported adjusted earnings per share of $0.31, surpassing the consensus of $0.20, while revenue also exceeded expectations at $2.88 billion compared to $2.84 billion. Net income nearly tripled from the same period last year, rising from $22.9 million to $66.9 million. CEO Sumit Singh expressed satisfaction with the company’s performance, highlighting strong net sales and record-breaking Adjusted EBITDA for the quarter.
Additionally, Chewy announced a $500 million share buyback program, which has garnered positive attention from investors. The repurchase program represents about 6% of the company’s market cap, signaling confidence in the company’s financial position and future prospects. This move has positioned Chewy as a potentially safe investment option in the eyes of the market.
In contrast, GameStop, a video game retailer with a turbulent history in the stock market, has faced challenges as physical game purchases decline in favor of digital downloads. However, a notable short squeeze orchestrated by retail traders on Reddit’s r/WallStreetBets forum in January 2021 led to a significant increase in GameStop’s stock price, with some traders earning substantial profits. The company’s most recent quarter saw declines in revenue, but cost-cutting measures have helped mitigate losses.
Ryan Cohen, the founder of Chewy and a major investor in GameStop, has played a key role in the transformation of the latter company. Cohen’s involvement as Executive Chairman has led to changes in management and strategic initiatives aimed at improving GameStop’s financial performance. With Cohen owning approximately 12% of the company, his influence is expected to drive further developments at GameStop.
Looking ahead, Chewy’s stock forecast suggests a potential reversal of its three-year downtrend, with the stock needing to break above key resistance levels to signal a more sustained upward trend. While the company has faced challenges, positive earnings and the share buyback program indicate a promising outlook for Chewy’s future growth and profitability.
