Locked down people have adopted 4-legged friends at a rapid pace during The China Virus chaos. This action is driving global pet product sales North of $125-B, according to the data.
Pet animals require food, treats and medicine and will continue after The People are all vaccinated. So we can expect spending on pet services to rise.
Public companies in this space have room to run.
Chewy (NYSE:CHWY) is the best in the show. The pet online retailer saw its share price rise 100% + since July 2020. It has over 18-M online users. Subscription sales make customers sticky, and increased focus on private-label products and healthcare services that widen margins.
The animal medicine developer Zoetis (NYSE:ZTS) had a more modest 20% share price bump in Y 2020. In November it raised its FY revenue guidance to $6.6-B. Pet pain medicine sales could drive growth in Y 2021.
PetSmart (private) leveraged itself to buy Chewy for over $3-B in Y 2017, said in October that the 2 would split. But investors balked at the refinancing, prompting S&P Global to downgrade PetSmart’s credit rating.
Overall, we see the post-virus pet industry growing and becoming more concentrated, especially as many mom-and-pop outlets may not weather the lockdowns.
So Chewy trading at about 5.5X sales roughly 2X its pre-virus multiple, is justifiable.
Our technical analysis of CHWY is overall Bullish to Very Bullish long-term. The stock is currently trading at 102.29 in NY.
A shift in investor sentiment away from virus beneficiaries would knock stocks like Chewy temporarily, even if their underlying businesses remain strong. But, long-term, the leaders of the pack are likely to pull away and continue to lead.
Have a healthy day, Keep the Faith!