During today's afternoon trading session, Chewy plummeted to $46.06 per share. It's still 9.34% above its mean target price of $42.13, so there may still be room for more downwards movement -- even after today's -4.5% drop. Analysts are giving the Specialty Retail stock on average rating of buy, with target prices ranging from 31.8 to 52.0 dollars per share.
For the greater market's outlook on the stock, we can use Chewy's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 7.6% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Chewy, institutional investors own 88.0% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in CHWY, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is positive market sentiment towards Chewy because of an analyst consensus of little upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about CHWY:
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It has trailing 12 month earnings per share (EPS) of $0.91 per share
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Chewy has a trailing 12 month Price to Earnings (P/E) ratio of 50.6 while the S&P 500 average is 29.3
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The company has a Price to Book (P/B) ratio of 72.88 in contrast to the S&P 500's average ratio of 4.74
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Chewy is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 20.93 and 2.93 respectively
