Americans love their pets. In fact, it’s probably not much of a stretch to assume that they love their pets more than some of their human blood relatives. Well before the novel coronavirus pandemic, this was the underlying catalyst for Chewy (NYSE:CHWY), an online pet supplies retailer. But with the new virus changing our society, the case for Chewy stock has become much more exciting.
First, a few facts about the pet industry. According to the American Pet Products Association, we collectively spent $95.7 billion on our furry friends. Below is a breakdown of the sales by category:
- Pet Food & Treats — $36.9 billion
- Supplies, Live Animals & OTC Medicine — $19.2 billion
- Vet Care & Product Sales — $29.3 billion
- Other Services — $10.3 billion
Given the nearly $37 billion in the pet food and treats segment (the biggest subsector by far), Chewy stock enjoys a healthy addressable market. For reference, the underlying company generated $3.53 billion in top-line sales in 2019. Further, its trailing 12-month revenue is nearly $5.4 billion.
Unlike other startups, though, Chewy has an excellent chance to cement itself within the industry thanks strangely to the coronavirus. First, Chewy is an online retailer, which necessarily means that its business is contactless. Given that the Centers for Disease Control and Prevention stated that cats and dogs can be infected with the coronavirus, many pet owners are incentivized to do their pet shopping at home.
Second and more importantly, the pandemic will likely lead to an increase in pet ownership. Several years ago, an American Humane Association survey discovered that one of the key reasons why people don’t buy pets is due to a lack of time.
However, time is exactly what people have due to the remote work phenomenon. That’s a huge plus for Chewy stock that you shouldn’t ignore.
Pet Ownership Benefits to Lift Chewy Stock
Based on information compiled by Statista.com, 20% of adults in the U.S. are working remotely. Within this broad category, 58% of workers in the knowledge industry are operating online as opposed to being in the office. In other words, Chewy stock has a big platform from which to justify its future premium.
Moreover, new daily coronavirus cases have been hitting dubious records recently. If the trend keeps up or worsens, it’s likely that companies will continue requesting that their employees stay home. This further solidifies the remote work industry, suggesting that we could see some permanent shifts to telecommuting.
Obviously, this is brilliant news for those employees fortunate enough to be working. With the time equation out the door, more people will consider pet ownership.
If that wasn’t enough of a reason to buy Chewy stock, the Covid-19 pandemic provides yet another catalyst. I’m not alone in stating that the last few months have been incredibly stressful. This is especially the case for those who may not have robust social networks. Therefore, the CDC has urged Americans to protect their mental health during this crisis.
Of course, that’s not so easy for everyone. If infections and particularly death rates spike, we could see voluntary quarantines. And this would lead to higher incidences of social isolation and depression.
However, pet ownership helps address many of the stresses and tension that could arise from this pandemic. Don’t get me wrong — people should be mentally stable to take care of an animal. But assuming this baseline stability, scientists have uncovered myriad benefits associated with pet ownership.
Thus, even if the crisis worsens, Chewy stock should enjoy a strong measure of resiliency.
Incentives Across the Board
Interestingly, HelpGuide.org notes that “Pet owners over age 65 make 30 percent fewer visits to their doctors than those without pets.” Considering that older people tend to have greater incidences of underlying medical conditions, this demographic has one of the strongest incentives to think about adopting a pet.
In addition, playing with dogs and cats can help soothe frayed nerves, as well as potentially promote healthier living through physical activity and exercise. After all, remote work isn’t without its cons. Most conspicuously, it tempts the couch potato lifestyle.
Essentially, the pet industry offers incentives up and down the board for society in the new normal. Bottom line, the runway has gotten a lot longer for Chewy stock, which is why you should take advantage of it now.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.