How Millennials and a Pandemic Will Lift Chewy Stock

If you want to know the simple reason for buying shares of online pet products retailer Chewy (NYSE:CHWY), it’s this: Americans love their pets. And that’s good news for Chewy stock.

The Chewy (CHWY) logo on a banner at the New York Stock Exchange.
Source: Chie Inoue / Shutterstock.com

It’s not just that, though, as this sentiment also carries a significant dollar amount. According to the American Pet Products Association, we collectively spent $95.7 billion for our furry friends. Furthermore, this is estimated to move up to $99 billion by end of 2020. Therefore, Chewy stock is levered to one of the most relevant industries.

Just as importantly, the household penetration rate for pet ownership in this country has steadily increased. For instance, back in 1988, the penetration rate was 56%. Fast forward 20 years later and this metric increased to 62%. Last year, according to the same pet association, 67% of households owned pets. So for stakeholders of Chewy stock, the novel coronavirus may actually accelerate this trend. I

Moreover, according to HelpGuide.org:

“Pets, especially dogs and cats, can reduce stress, anxiety, and depression, ease loneliness, encourage exercise and playfulness, and even improve your cardiovascular health. Caring for an animal can help children grow up more secure and active. Pets also provide valuable companionship for older adults. Perhaps most importantly, though, a pet can add real joy and unconditional love to your life.”

Unlike other disasters, the novel coronavirus pandemic has materially impacted all of us. Sure, we be fortunate not to have suffered from Covid-19 directly. But whether we know someone who did or through loss of income, this has been a paradigm-altering event. For once, an oft-repeated pop culture phrase has substance: we are in this together.

Plus, with social distancing protocols separating friends and family, pet companionship is one of the most viable platforms for mental and even physical health.

Chewy Stock Can Ride a Familiar Demographic: Millennials

As you know, companies today focus largely on millennials — and there’s a good reason for that. According to the Pew Research Center, millennials represent the largest generation in the U.S. labor force. Like other generations, as they age, their spending power increases.

Therefore, whether you like it or not, corporate pandering to millennials will last for years to come. And fortunately, the underlying company behind Chewy stock doesn’t have to beg.

When you drill down the details regarding America’s love affair with pets, you’ll notice that millennials favor pet ownership to child rearing, particularly in our largest (and most unaffordable) cities. Based on a report from City-Journal.org, contributor Michael Hendrix notes:

“Pets are now more common than kids in many U.S. cities. San Francisco, for example, is home to nearly 150,000 dogs but just 115,000 children under age 18. Farther north, Seattle has more households with cats than with kids. Nationwide, pets outnumber children in apartment buildings. In New York neighborhoods like Long Island City and Williamsburg, wealthy singles have the highest number of pooches per capita.”

Again, this isn’t about making a social commentary. This dynamic is what it is. But if you’re considering Chewy stock, you better pay attention. Well before the pandemic, younger people were leaning toward pet ownership. And with the crisis, this situation could lean further still.

As you might expect, love and dating during the coronavirus has changed. Thus, for some lovebirds, this transition could be a positive development. With intimacy out of the question for the interim, people can focus on substantive qualities.

However, it also means that the speed in which young people connect has drastically declined. S, to fill that companionship gap — especially in this heavily mitigated period — pet ownership will likely increase. And that is a huge tailwind for Chewy stock.

Chewy Doesn’t Just Benefit From the Young

While I’m focused on millennials, the narrative for Chewy stock is positive across the board. Again, this is due to the measures governments put in place to stem the tide of Covid-19.

Primarily, millions of Americans have sheltered in place, only going out to public areas for essential goods and services. But with e-commerce and ship-from-store deliveries, many of these purchases can be conducted online. Obviously, this is critical for older populations and those with underlying health conditions.

Therefore, every pet-owning household, not just millennials, are incentivized to consider contactless services — which clearly benefits Chewy stock. And while the Centers for Disease Control and Prevention consider the risk of household pets becoming infected with Covid-19 to be low, many pet parents won’t want to take that chance.

After all, we love our four-legged friends. So why would we put them at any risk? That said, with Chewy, pet owners never have to think about this question again.

On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.


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