Chewy (CHWY) is Setting Up for a Big Move

A rectangle pattern has formed in the chart of Chewy Inc. (CHWY). When this pattern is broken, a breakout or a breakdown is expected…

Chewy Inc. (CHWY) is an online destination for pet parents. The company provides pet food and treats, pet supplies and pet medications, other pet-health products, and pet services. Through its website and mobile applications, it offers Dry Food, Wet Food, Prescription Food, Human Grade, Food Toppings, and Frozen Food among others.

The company performed well during the pandemic, with its stock soaring over 200% last year. The switch to e-commerce provided a tailwind for the company. Even as the economy has been opening back up, both e-commerce and the U.S. pet market is expected to grow, which should benefit the company.

CHWY has a current ratio of 0.9, which means its current assets are lower than its current liabilities. From a liquidity standpoint, that’s a concerning figure. The company also has a negative profit margin.

Sales were up 51.1% in the most recent reported quarter and earnings were positive for the first time. The stock is trading at a very high multiple though, with a forward P/E over 1,400. The stock hit a high earlier in the year, but started trending downward since March. It has shown mixed performance since.

Take a look at the 1-year chart of CHWY below with added notations…

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