Chewy IPO, Can the Pet Supply Company Survive?

An IPO for a company such as Chewy could easily be considered either a huge mistake or a sign that consumers are ready and willing to buy pet food, toys, and other accessories online. Due to the fact that Chewy has some striking similarities to a company that many people have heard of that is a common example of stocks during the.com bubble known as pets.com, many people believe that the tech/retail company could see a similar fate in the near future. In this article we’ll be discussing whether or not Chewy is a good investment, how it compares and contrasts with pets.com, and whether or not you should be putting your hard earned money into it.

What is Chewy?

Chewy is an online retail company which sells pet accessories including food, toys, leashes and collars, and pretty much anything you need when taking care of a pet. It is online meaning that consumers on the site will need to have all their merchandise shipped to them as opposed to picking it up in a pet store or grocery store. However, Chewy also offers the option of a subscription service which allows you to have bags of food shipped to you on a regular basis at a discounted rate. Chewy is a publicly traded stock as of right now and has already had its IPO where it was originally priced at $35 a share approximately a year ago (June 2019) from the publishing of this article.

Chewy’s IPO Performance

Since Chewy’s IPO in the middle of 2019 the stock has stayed very quiet gravitating between $22 and $35 a share. This was until recently, in March of 2020, when the stock increased, for the first time since its IPO, past its initial price. The stock’s increase could be tied to paranoia caused by the coronavirus. Because people are more hesitant to go to stores and have limited exposure by shopping online more frequently, Chewy has likely seen an increase in traffic and purchases, and so long as this pandemic continues it will likely continue to increase.

Chewy IPO vs Pets.com

Chewy can very easily be compared to pets.com given that pets.com was a stock that was listed publicly, and subsequently failed, only 11 years before the founding of Chewy which is aimed at doing the exact same thing as pets.com. But the differences between the two companies, although they may not seem huge, are a sign that Chewy will be around much longer then pets.com was. Pets.com was a huge bomb due to the fact that in 2000 online shopping had not yet become as dominant of a force in the retail market as it currently is today with Amazon, eBay, and other retail services where you can buy with a single click. All of that has changed where online shopping has actually begun to phase out in-person shopping.

Another major difference between Chewy and pets.com is that Chewy is owned by a larger parent company that has almost cornered the market on pet goods. Chewy is owned by PetSmart which means that Chewy has no real physical competition and as a result Chewy only adds to the profits that PetSmart is already making. These two factors alone are big enough to cause Chewy to be a significantly more profitable stock than pets.com, and certainly prevent it from bombing in the future.

Should You Invest in a Chewy IPO?

Sure, I get it, there is a ton of skepticism involved with any online specific niche E-commerce sites being listed on the New York Stock Exchange (especially when they are selling pet supplies), however, this isn’t the early 2000s anymore. As a society we have grown to accept that online shopping is not only going to be around for an incredibly long time but that in certain situations it can be more convenient to the buyer. That being said, Chewy does not have the best stock record, and although it may seem more promising than pets.com, it is this author’s opinion that it is still not a good buying decision. Once the pandemic blows over and the hysteria caused by it subsides many people will go back to their old routines of buying pet food at Walmart or a physical pet store and cut out the middleman of shipping and any fees that you may incur on top of just purchasing pet food.

Sources:

https://finance.yahoo.com

https://money.cnn.com/data/markets/

https://inflationhedging.com/how-to-pass-the-series-7-exam/

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