Any doubts about owning Chewy (CHWY -5.27%) stock right now are certainly understandable. The United States’ pet-ownership rate slipped from 70% of households to 66% last year, according to the American Pet Products Association (APPA), which may have something to do with the cost of taking care of our “furbabies.” A recent poll taken by USA Today indicates that 91% of the nation’s dog owners — America’s favorite pet — have suffered some degree of financial stress taking care of their pooches. In this vein, BNP Paribas’ packaged food analyst Max Gumport notes the 11% increase in pet food prices since last year is responsible for the 3% decline in the country’s spending on premium pet food for the three-month stretch ending in July.
It all seems to point to trouble for online pet supply store Chewy. These headwinds may even be a key part of the reason Chewy shares are down more than 80% from their early 2021 peak, reaching a new 52-week low (and nearing a record low) just this week.
There are four reasons why, however, this stock’s steep sell-off in the middle of seemingly bad news is actually a great buying opportunity.
Four reasons Chewy stock is a buy
1. Chewy is often the low-price leader
Consumers may be adapting to inflation by buying cheaper stuff … and less of it. It’s a dynamic, however, that actually works in Chewy’s favor. See, Chewy’s prices are often the best prices, beating brick-and-mortar retail prices.
The key to these low prices isn’t what Chewy does…
