It looked like Monday was going to be a big day in meme stock land with the latest addition making waves before the opening. Shares of pet products retailer Chewy (CHWY) were up by as much as 45% in pre-market trading with meme stock ringleader Keith Gill, a.k.a. Roaring Kitty, responsible for the huge gains.
That was down to a disclosure of a big stake Gill had taken in the company. A SEC filing showed Gill owned 9 million CHWY shares, representing a 6.6% stake, and currently worth almost $229 million. Gill’s stock preferences show a developing theme as Chewy was co-founded by Ryan Cohen, who went on to become CEO of GameStop, the stock Gill first touted as ripe for the picking, and which set off the meme-stock craze.
However, for the retail crowd hoping for another stratospheric run, things soured pretty quickly, and shares reversed course, plunging in to the red not long after the day’s trading kicked off. An announcement of a lawsuit against Gill, accused of a pump-and-dump scheme, didn’t help proceedings either. Martin Radev filed the lawsuit on behalf of other investors potentially impacted by the recent revival of the GameStop shenanigans, once again set in motion by Gill.
So, a volatile day for Chewy, but more to the point, is this a stock worth buying into right now? Not really, according to Oppenheimer’s Rupesh Parikh. The 5-star analyst reminds investors that only last week, the company announced an agreement to repurchase shares worth around $500 million (priced at $28.49) from “key insider” BC Partners. “We believe this recent data point, coupled with continued uncertainty on the company’s ability to drive toward high single digit sales growth in a muted inflation backdrop, adds downside risks on a fundamental basis from here, even with recent green shoots in the business,” Parikh explained. “In addition, we see risks of additional insider sales if gains hold or increase. We remain sidelined and are closely watching how trading dynamics unfold from here.”
Accordingly, Parikh maintained a Perform (i.e., Neutral) rating on the shares without having a fixed price target in mind. (To watch Parikh’s track record, click here)
Parikh’s view, however, is not the most popular one on Wall Street. 6 others join him on the fence, but with an additional 14 Buys and 1 Sell, the stock claims a Moderate Buy consensus rating. That said, the $25.93 average target implies the shares will remain rangebound for the time being. (See Chewy stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
