Chewy Stock Bites Off Bull Notes After Earnings Beat

Chewy hit a fresh high during today's session

Digital Content Manager
Dec 9, 2020 at 11:21 AM
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The shares of online pet supply retailer Chewy Inc (NYSE:CHWY) are up 3.2% at $81.75 this morning after reporting better-than-expected third-quarter earnings. The company attributed the positive results to strong sales, which came in at $1.78 billion, compared to analysts' estimates of $1.72 billion, and added it expects net sales for the fourth-quarter to beat expectations as well at roughly $1.96 billion. In turn, the security earned no less than eight price-target hikes, including one from J.P. Morgan Securities to $97 from $72.

The shares of Chewy have been carving a channel of higher highs over the past several months and just hit yet another record peak of $81.97 earlier in the session. In addition, the equity has nearly quadrupled off its March 12 all-time low of $20.62, with the 100-day moving average containing a November bear gap. Year-over-year, CHWY is up an impressive 220%.

Analysts were mostly optimistic toward the security coming into today, with 10 of the 14 in coverage sporting a "buy" or better rating, and the remaining four a tepid "hold." Plus, the stock's 12-month consensus target of $86.69 is a 7.2% premium to current levels. 

Short sellers, meanwhile are building their positions. Short interest is up 7.8% in the last two reporting periods, and the 13.77 million shares sold short make up a whopping 25.8% of the stock's available float, or over three days' worth of pent-up buying power.

Short-term traders are also leaning bearish in the options pits. This is per the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.12, which sits higher than 95% of readings from the past year. This means short-term option traders have rarely been more put-biased.

The tide seems to be shifting today, however. Already, 79,000 calls and 34,000 puts have crossed the tape, which is six times what is typically seen at this point. Most popular is the weekly 12/11 80 strike-call, followed closely by the 12/11 85 strike-call, with new positions currently being opened at both. 

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