Online pet supplies retailer Chewy Inc. (NYSE: CHWY) shares are up nearly 8% year-to-date (YTD). The stock made headlines as the latest meme stock position taken by infamous investor Keith Gill, best known under his alias “Roaring Kitty." Stock and call volumes spiked due to his involvement and ceded as shares continued to form a higher base. Investors wonder if Chewy’s stock is finally out of the doghouse as it has maintained its prices well above the $20 ceiling ahead of its Q1 2024 earnings beat.

Chewy operates in the retail/wholesale sector, competing with pet supply companies like Petco Health & Wellness Co. (NASDAQ: WOOF) and retailers that stock supplies like Walmart Inc. (NYSE: WMT) and Target Co. (NYSE: TGT).

Roaring Kitty Enters Chewy Stock

On June 27, 2024, Gill cryptically posted a picture of a cartoon dog on his X account. This immediately spurred speculation of his latest pick being a pet stock. Shares of Chewy blasted 34% to a high of $39.10 before settling back down to close at $29.05. Gill later disclosed a 6.6% stake in Chewy in an SEC filing, which is around 9 million shares. The average price of his stake isn't known and won't be known until his next streaming event, where he tends to post a real-time view of his Morgan Stanley (NYSE: MS) owned E-trade account. His last Alphabet Inc. (NASDAQ: GOOGL) YouTube stream touting his GameStop Co. (NYSE: GME) position had over 640,000 attendees. Gill has been a big believer in Ryan Cohen, founder of Chewy and CEO of GameStop, which is the major factor linking the two companies.  

Chewy Thrives on Its Autoship Program

Pet owners are aware of how tedious it can be to make regular trips to the pet store to stock up on pet supplies on a consistent basis. Chewy makes the routine frictionless by providing a convenient way to deliver supplies straight to pet owners. It thrives on a “set it and forget it” mechanism program called Autoship. This enables customers to schedule recurring deliveries that fit their budget and time schedules. The more items you Autoship, the more savings you can receive.

Chewy is also expanding with services like its pet insurance and wellness product called Chewy CarePlus. Its pet insurance actually pays directly to the veterinarian rather than to the customer, like Lemonade Inc. (NYSE: LMND). However, pet owners can opt to submit a claim themselves for reimbursement. They also provide 100% drug coverage with no payout limits and provide live veterinarian telehealth services. Chewy just opened three Chewy Vet Care Clinics and is planning on launching more. 

CHWY Forms a Potential Head and Shoulders Pattern

The daily candlestick chart on CHWY depicts a potential head and shoulders pattern. This pattern is comprised of 3 peaks connected by a neckline. The first peak formed the left shoulder at $24.17. The second and highest peak formed the head at $39.10. The third peak formed the right shoulder at $28.16. The neckline support is testing around $25.24. The daily relative strength index (RSI) is falling at the 52-band. Pullback support levels are at $23.73. $20.71, $18.33 and $17.03.  

Stellar Q1 2024 Earnings Broke Chewy Out of the Range

Chewy reported a record-breaking Q1 2024 adjusted diluted EPS of 31 cents, beating analyst estimates by 27 cents. Net income was $66.9 million, which included stock compensation expenses and taxes of $69.5 million. The net rose by 2.3%, rising by 150 bps YoY. Adjusted EBITDA was $162.9 million, up $52.1 million YoY. Adjusted net income was $137.1 million, up 49.1% YoY. Revenues climbed 3.1% YoY to $2.88 billion, beating $2.85 billion consensus estimates. Gross margin rose 139 bps YoY to 29.7%. Net sales per average customer (NSPAC) rose 9.5% YoY to $562. The company authorized a $500 million stock buyback program.

Chewy Issues Mixed Guidance

Chewy provided downside revenue guidance of $2.84 billion to $2.86 billion versus $2.87 billion consensus estimates for Q2 2024. For the full-year 2024, Chewy reaffirmed revenues of $11.6 billion to $11.8 billion versus $11.7 billion consensus estimates. Normally, the lowered Q2 guidance would have sunk the shares, but the buyback authorization likely helped to gap up shares the following morning. Shares were further elevated by the 5% short float, followed later by the Roaring Kitty position speculation.  

Chewy is Testing a Beta Monthly Membership Program

Currently under beta testing, Chewy Plus is a monthly membership plan that will offer a range of benefits to subscribers, including cash accrual rewards, free shipping, and exclusive membership perks. Chewy CEO Sumit Singh commented, “The program is currently in its beta state, and throughout the year, we will explore different test and learn approaches to understand how it impacts discovery of our growing products and services, wallet consolidation and NSPAC acceleration, all while maintaining economic sensibility. We are excited about the program and look forward to sharing more over the coming quarters.”

Chewy analyst ratings and price targets are at MarketBeat. The consensus analyst price target of $27.07 presents a 6.12%  upside.