Why Chewy Stock is Getting Blasted by Bears Before Earnings

The online pet retailer reports its third-quarter earnings later this week

Deputy Editor
Dec 6, 2021 at 10:32 AM
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The shares of Chewy Inc (NYSE:CHWY) are down 5% at $59.52 this morning after Wedbush downgraded the stock to "neutral" from "outperform," and cut its price target to $70 from $90. This bear note comes just ahead of Chewy's third-quarter earnings report, which is due out after the close on Thursday, Dec. 9. 

The equity does have a history of mostly negative post-earnings moves, with six of its last eight next day returns coming in lower, including a 9.3% drop in September 2020. The options pits are pricing in a massive 22.3% next-day swing this time around, which is much bigger than the 6.1% move the stock averaged over the past two years, regardless of direction. 

Options players are responding to Wedbush's bear note today, too. So far, 18,000 puts have crossed the tape, which is five times the intraday average, compared to 6,091 calls. The most popular is  the December 75 put, followed by the weekly 12/10 55-strike put, with positions being sold to  open at the latter. 

Analysts are still quite optimistic. The 12-month consensus price target of $94.60 is a 60.6% premium to current levels. Meanwhile, nine of the 15 in coverage called CHWY a "strong buy" heading into today. 

Today's negative price action has CHWY breaching familiar support at the $60 region, and heading for its lowest close in over a year. In the past 12 months, the security has lost 34%. 

 




 
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